AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October 6, 2008 is made by and among inTEST Corporation, a Delaware corporation (the "Parent"), Sigma Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), Sigma Systems Corp., a California corporation (the "Company"), Xxxxx X. Xxxxxx, Trustee of the Exemption Trust, a sub-trust of the Xxxxxx X. Xxxxxxx Separate Property Trust dated March 17, 2003 (the "Exemption Trust"), Xxxxx X. Xxxxxx, Trustee of the Xxxxx X. Xxxxxx Trust, a sub-trust of the Xxxxxx X. Xxxxxxx Separate Property Trust dated March 17, 2003 (the "Q-TIP Trust" and, together with the Exemption Trust, the "Stockholders"), and Xxxxx X. Xxxxxx ("Xxxxxx").
RECITALS
A.
The
Company is engaged in the business of designing, manufacturing,
marketing and
selling thermal platforms and environmental test xxxxxxxx (the "Business").
The Stockholders are the holders of all of the issued and outstanding
shares of
capital stock of the Company (the "Company Stock").
B. The Board of Directors and the
stockholders of the Company
have adopted this Agreement in accordance with the requirements of the
California General Corporation Law, as amended (the "California
GCL").
C. Parent as the sole stockholder of
Merger Sub, has adopted
this Agreement in accordance with the requirements of the Delaware
General
Corporation Law, as amended (the "Delaware GCL").
Merger
Sub was incorporated on July 3, 2008 expressly for the purpose of this
Agreement and has not conducted any business.
D. The respective Boards of Directors of
Parent, Merger Sub
and the Company deem it advisable and in the best interests of their
respective
stockholders to consummate the merger provided for herein, pursuant to
which
the Company will merge with and into Merger Sub, leaving Merger Sub as
the
surviving corporation under the California GCL and the Delaware GCL and
as a
wholly-owned subsidiary of Parent.
E. Certain capitalized terms used herein
have the meanings
ascribed to such terms in ARTICLE IX hereof.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual promises and covenants contained herein, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto covenant and agree as follows:
ARTICLE
I
MERGER
1.1
Agreement of Merger; Merger.
Subject to the terms and conditions
of this Agreement, at the Closing, Parent, Merger Sub and the Company
shall
execute and deliver the Certificate of Merger in the form of Exhibit
A
hereto (the "Certificate of Merger") and file the
Certificate
of Merger and any required certificates with the Secretary of State of
Delaware
and the Secretary of State of California, as applicable. The
time as the
Certificate of Merger is so filed with the Secretary of State of
Delaware shall
be referred to as the "Effective Time". At
the Effective
Time, in accordance with the Certificate of Merger, the Company will be
merged
with and into Merger Sub with Merger Sub being the surviving
corporation, and
the separate existence of the Company shall cease (the "Merger").
Merger Sub and the Company are sometimes referred to herein as the "Constituent
Corporations" and the Merger Sub as the surviving corporation
following the Merger is sometimes referred to herein as the "Surviving
Corporation".
1.2
Effects of the Merger.
(a)
At and after the Effective Time, the Merger shall have the
effects set
forth in the California GCL and the Delaware GCL. Without
limiting the
generality of the foregoing, and subject thereto, at the Effective Time
all the
property, rights, privileges, powers and franchises of the Company and
Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities
and
duties of Company and Merger Sub shall attach to the Surviving
Corporation.
(b)
At the Effective Time, the Certificate of Incorporation of
the Merger Sub
in effect immediately prior to the Merger shall be the Certificate of
Incorporation of the Surviving Corporation except that Article FIRST of
the
Certificate of Incorporation shall be amended to read: "The name of the
corporation is SigmaSYS Corp.".
(c)
At the Effective Time, the Bylaws of Merger Sub as in effect
immediately
prior to the Effective Time shall be the Bylaws of the Surviving
Corporation
(except that all references to Merger Sub in the Bylaws of the
Surviving
Corporation shall be changed to reflect the name change of Merger Sub
discussed
in Section 1.2(a)).
(d)
At the Effective Time, each of the directors and officers of
the Merger
Sub immediately prior to the Effective Time, being the individuals
whose names
and positions are listed on Schedule 1.2(d) hereto,
shall be the
directors and officers of the Surviving Corporation, each to hold
office until
such person's respective death, permanent disability, resignation or
removal or
until his or her respective successor is duly elected and qualified,
all in
accordance with the Certificate of Incorporation and Bylaws of the
Surviving
Corporation and applicable Law.
ARTICLE
II
CONVERSION OF SECURITIES
2.1
Merger Consideration; Effect on Company Capital Stock.
The
aggregate merger consideration (the "Merger Consideration")
shall consist of:
(a)
One Million Dollars ($1,000,000) cash (the "Cash
Merger
Consideration");
(b)
Parent's non-negotiable promissory notes (each, a "Note"),
one to each Stockholder pro rata in accordance with their respective
share
ownership of the Company immediately before the Effective Time (such
proportionate shares, the "Stockholder Ownership Percentages"),
in an aggregate in a principal amount equal to One Million Four
Hundred
Thousand Dollars ($1,400,000) plus the amount by which the Final
Qualified Net
Working Capital exceeds negative One Hundred Thousand Dollars
(-$100,000) (or,
if the Final Qualified Net Working Capital is less than negative One
Hundred
Thousand Dollars, then such principal amount shall be equal to One
Million Five
Hundred Thousand Dollars ($1,500,000) reduced by the Final Qualified
Net
Working Capital). Each Note shall be in substantially the
form of Exhibit
B hereto, shall be dated as of the Closing Date but shall be
issued in
accordance with Section 2.3(e), shall bear interest
from the Closing
Date at the Prime Rate plus 1.25%, and shall be payable as follows: (i)
a
payment of accrued but unpaid interest on the first anniversary of the
Closing
Date; and (ii) subsequent annual payments of principal and accrued but
unpaid
interest on each of the next four anniversaries of the Closing Date,
with the
amount of each such payments of principal and interest equaling the sum
of (A)
the accrued but unpaid interest as of such payment date plus (B)(I) the
total
amount of principal then outstanding divided by (II) the number of
payments of
principal then remaining to be paid (such that the portion of the
outstanding
principal due on each such anniversary would be equal, unless the
principal has
been prepaid, set off or otherwise reduced, in which case the payments
remaining after any such reduction would be equal); and
(c)
Five Hundred Fifty Thousand (550,000) shares of Parent's
common stock,
par value $0.01 per share ("Parent Shares"), of
which One
Hundred Eighty Thousand (180,000) of the Parent Shares shall be the
Escrow
Shares.
2.2
Right to Receive
Merger Consideration. At the Effective Time, by
virtue of the Merger
and without any further action on the part of Parent, Merger Sub, the
Company
or any Stockholder:
(a)
all of the shares of Company Stock issued and outstanding
immediately
prior to the Effective Time, other than treasury shares, shall be
canceled,
extinguished and converted, in the aggregate, into the right to receive
the
Merger Consideration (with the holder of each such share of Company
Stock
having the right to receive, in respect of such share, a ratable share
of the
Merger Consideration); and
(b)
any shares of Company Stock held in the Company's treasury
immediately
prior to the Effective Time shall not represent the right to receive
any Merger
Consideration, and each such share shall be canceled and retired and
shall
cease to exist, and no cash, securities or other property shall be
payable in
respect thereof; and
(c)
each share of common stock of Merger Sub, par value $0.01 per
share,
issued and outstanding immediately prior to the Effective Time shall
not be
converted and shall remain issued and outstanding.
2.3
Qualified Net
Working Capital Adjustment.
(a)
Definitions. For purposes of
this Section 2.3, the
following terms shall have the meanings assigned to them in this Section
2.3(a):
(i)
"Accounting Principles" means accounting
principles
applied on a basis consistent with those used in preparation of the
Full-Year
Financial Statements;
(ii) "Final
Qualified Net Working Capital" means the Company's Qualified
Net
Working Capital as of the close of business on the Closing Date (A) as
shown in
the Qualified Net Working Capital Statement if no Notice of Objection
with
respect thereto is timely delivered by Xxxxxx to Parent pursuant to Section
2.3(c); or (B) if a Notice of Objection is so delivered, (1)
as agreed by
Parent and Xxxxxx pursuant to Section 2.3(c) or (2)
in the absence of
such agreement, as shown in the Independent Expert's calculation
delivered
pursuant to Section 2.3(d).
(iii) "Qualified
Accrued Expenses" means the Company's accrued expenses, including
the Xxxxxx-Xxxxxx Payables but excluding (A)
warranty reserves and bad
debt reserves; (B) employee vacation, so long as it is accrued on the
Company's
accounting records as of the Closing Date; (C) accounts payable to
accounting
firms relating to the audit of the Company's financial statements for
the
fiscal years ended December 31, 2007 and 2006 and the six-month period
ended
June 30, 2007 (but not excluding any other account payable to
accounting
firms), and (D) that portion of professional fees, costs and expenses
incurred
in connection with the Merger that Section 10.4 of
this Agreement
provides are to be allocated to and paid by Stockholders and Xxxxxx.
(iv) "Qualified
Inventory" means inventory items of the Company that are
both: (i)
purchased by the Company in quantities beyond the Company's normal
inventory
levels for items of that type in accordance with past practice; and
(ii)
expressly agreed in writing by Parent, on or prior to the Closing Date,
as
constituting items of Qualified Inventory.
(v)
"Qualified Net Working Capital" means (A)
the sum of
Company's cash and cash equivalents, Adjusted Accounts Receivable,
prepaid
expenses, Qualified Inventory and other current assets as of the close
of
business on the business day before the Closing Date, less (B) the sum
of
Company's accounts payable, Qualified Accrued Expenses, indebtedness
for
borrowed money (including any balance due under any promissory notes,
revolving
credit line or other credit facility, the loan from Xxxxxx or any of
her
Affiliates), customer deposits and other current liabilities as of such
date
(but excluding those items that are expressly excluded from the
definition of
Qualified Accrued Expenses). For the avoidance of doubt,
Qualified Net
Working Capital does not include total inventory or accrued expenses,
but only
Qualified Inventory and Qualified Accrued Expenses.
(vi) "Adjusted
Accounts Receivable" includes (i) accounts receivable
generated prior
to October 1, 2008, and (ii) an amount equal to (A) the sum of all
accounts
receivable generated during the month of October, 2008 (whether before
or after
the Closing Date), times (B) a fraction, the numerator of which is the
number
of calendar days elapsed from October 1, 2008 until the Closing Date
and the denominator
of which is thirty-one (31), in each case without any reduction for bad
debt
reserves.
(vii) "Qualified
Net Working Capital Statement" means an unaudited statement
of the
Company's Qualified Net Working Capital as of the close of business on
the
business day before the Closing Date that is prepared by Parent in
accordance
with the Accounting Principles.
(b)
Within thirty (30) days after the Closing Date, Parent will
prepare, or
cause to be prepared, and deliver to Xxxxxx the Qualified Net Working
Capital
Statement which shall set forth Parent's calculation of the Company's
Qualified
Net Working Capital as of the Closing Date.
(c)
Upon receipt from Parent, Xxxxxx shall have thirty (30) days
to review
the Qualified Net Working Capital Statement provided that such deadline
shall
be extended one day for each day, or part thereof, that Xxxxxx has
requested,
but not been given, access to the Company records for purposes of
reviewing
Parent's calculation of Qualified Net Working Capital (such period, the
"Review
Period"). Parent and Surviving Corporation covenant
to give Xxxxxx access to their respective records as is reasonably
necessary for Xxxxxx or her agents to review Parent's calculation of
Qualified Net Working
Capital. If Xxxxxx disagrees with Parent's computation of the
Qualified
Net Working Capital, Parent may, on or prior to the last day of the
Review
Period, deliver a written notice to Parent (the "Notice of
Objection"),
which sets forth Xxxxxx'x objections to Parent's calculation of
Qualified Net
Working Capital. Any Notice of Objection shall specify those
items or
amounts with which Xxxxxx disagrees, together
with a detailed written explanation of the reasons for disagreement
with each
such item or amount, and shall set forth Xxxxxx'x
calculation of Qualified Net Working Capital based on such
objections. To
the extent not set forth on the Notice of Objection, Xxxxxx shall be
deemed to have agreed with
Parent's calculation of all other items and amounts contained in the
Qualified
Net Working Capital Statement.
(d)
Unless Xxxxxx delivers the Notice of
Objection to Parent within the Review Period, Xxxxxx shall be deemed to
have accepted
Parent's calculation of Qualified Net Working Capital and the Qualified
Net
Working Capital Statement shall be final, conclusive and
binding. If Xxxxxx delivers the Notice of Objection to Parent
within
the Review Period, Parent and Xxxxxx
shall, during the 30 days following such delivery or any mutually
agreed
extension thereof, use their respective commercially reasonable efforts
to
reach agreement on the disputed items and amounts in order to determine
the
Qualified Net Working Capital. If, at the end of such period
or any
mutually agreed extension thereof, they are unable to resolve their
disagreements, they shall jointly retain and refer their disagreements
to an
independent accounting firm mutually acceptable to Xxxxxx and Parent
(the
"Independent Expert"); provided that no item may be
objected
to or submitted to the Independent Expert unless the aggregate amount
of all
items objected to and submitted is greater than $20,000. The
parties
shall instruct the Independent Expert to promptly review this Section
2.3
and to determine solely with respect to the disputed items and amounts
so
submitted whether and to what extent, if any, the Qualified Net Working
Capital
set forth in the Qualified Net Working Capital Statement requires
adjustment. The Independent Expert shall base its
determination solely on
written submissions by Parent and Xxxxxx
and not on an independent review. In so reviewing, the
Independent Expert
shall only be permitted to ascribe a value to any particular item of
dispute
within the range of the highest and lowest values ascribed to that item
by Xxxxxx and Parent, as the
case may be. Xxxxxx
and Parent shall make available to the Independent Expert all relevant
books
and records and other items reasonably requested by the Independent
Expert. As promptly as practicable but in no event later than
45 days
after its retention, the Independent Expert shall deliver to Xxxxxx and
Parent
a report which sets forth its resolution of the disputed items and
amounts and
its calculation of the Qualified Net Working Capital; provided that in
no event
shall Qualified Net Working Capital as determined by the Independent
Expert be
less than Parent's calculation thereof set forth in the Qualified Net
Working
Capital Statement nor greater than Xxxxxx'x calculation thereof set
forth in
the Notice of Objection. The decision of the Independent
Expert shall be
final, conclusive and binding on the parties. The costs and
expenses of
the Independent Expert shall be allocated between the parties based on
the
percentage which the portion of the contested amount not awarded to
each party
bears to the amount actually contested by such party.
(e)
Within three (3) business days after Qualified Net Working
Capital has
been finally determined pursuant to this Section 2.3,
Parent shall issue
the Notes in the principal amount determined in accordance with Section
2.1(b), and Parent shall cause the Surviving Corporation to
execute and
deliver to Xxxxxx a security agreement in substantially the form of Exhibit
G hereto pursuant to which Surviving Corporation will grant
to the
Stockholders a security interest in certain of Surviving Corporation's
assets
as security for Parent's obligations under the Notes.
2.4
Closing.
(a) Closing.
The closing of the transactions
contemplated by this Agreement (the "Closing") shall
take
place simultaneously with the execution and delivery of this Agreement
by
electronic transmission of the signature pages of this Agreement and
any other
agreements contemplated hereby on the date of this Agreement or at such
other
time or place as may be agreed by Parent and the Company on the date
hereof,
the "Closing Date").
2.5
Closing
Obligations. At the Closing:
(a)
The Company, the Stockholders and Xxxxxx shall deliver or
cause to be
delivered to Parent:
(i)
The stock certificates representing the Company Stock for
cancellation;
(ii) the
agreements, certificates, consents, waivers and other instruments and
documents
referred to in Section 5.1;
(iii) possession
of all corporate, accounting, business and Tax records of the Company,
and all
minute books, stock register books and stock record books of the
Company; and
(iv) such
other instruments and certificates as may be reasonably requested by
Parent.
(b)
Parent shall deliver or cause to be delivered to the
Stockholders:
(i)
An aggregate amount equal to the Cash Merger Consideration
(which payment
shall be made to each Stockholder in accordance with their respective
Stockholder Ownership Percentages);
(ii) Stock
certificates representing the Parent Shares (other than the Escrow
Shares)
(which stock certificates shall reflect the record ownership of the
Parent
Shares by the Stockholders in accordance with their respective
Stockholder
Ownership Percentages);
(c)
Parent shall deliver or cause to be delivered to Xxxxxx:
(i)
the agreements, certificates, consents, waivers and other
instruments and
documents referred to in Section 5.2; and
(ii) such
other instruments and certificates as may be reasonably requested by
the
Company or Xxxxxx.
(d)
Parent shall pay or cause to be paid the Bank Payoff Amount
to the Bank
and the Lender Trust Payoff Amount to the Lender Trust.
(e)
Parent shall deliver or cause to be delivered to the Escrow
Agent a
certificate or certificates representing the Escrow Shares.
The Escrow
Shares shall be held in the Escrow Fund by the Escrow Agent and shall
be
available to compensate Parent for Losses as provided in ARTICLE
VII and
the Escrow Agreement. To the extent not used for such
purposes, the
Escrow Shares shall be released as provided in the Escrow Agreement.
(f)
Parent shall file or cause to be filed the Certificate of
Merger and any
required certificates with the Secretary of State of Delaware and the
Secretary
of State of California, as applicable, in accordance with Section
1.1.
2.6
No Further
Ownership Rights in Company Common Stock. The
payment of the Merger
Consideration in respect of each share of Company Stock shall be deemed
to have
been paid in full satisfaction of all rights pertaining to each such
share of
Company Stock, and there shall be no further registration of transfers
on the
stock transfer books of the Surviving Corporation of the shares of
Company
Stock which were outstanding immediately prior to the Effective Time
2.7
Approval by All
Holders of Company Stock. It is a condition
precedent to the closing
of the transactions contemplated by this Agreement that all holders of
Company
Stock vote or otherwise consent to the Merger and to the transactions
contemplated by this Agreement.
ARTICLE
III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY, STOCKHOLDERS AND XXXXXX
The
Company, Stockholders and
Xxxxxx hereby jointly and severally represent and warrant to Parent as
of the
date hereof and as of the Closing Date that the statements contained in
this ARTICLE
III are true and correct, except as set forth in the
disclosure schedule
dated and delivered as of the date hereof by Company to Parent (the "Disclosure
Schedule"). The Disclosure Schedule shall consist
of numbered
schedules corresponding to each representation and warranty set forth
in this ARTICLE
III. Each exception to a representation and
warranty set forth in the
Disclosure Schedule shall be deemed to qualify the specific
representation and
warranty which is referenced in the applicable numbered schedule and no
other
representation or warranty unless such other applicable schedule is
cross-referenced or unless the applicability of such exception to
another
schedule is reasonably apparent under the circumstances.
3.1
Organization and
Qualification. The Company is a corporation duly
organized, validly
existing and in good standing under the laws of the State of California
and has
full corporate power and authority to conduct its business as it has
been and is
presently being conducted and to own, operate or lease, as applicable,
its
properties and assets now owned, operated or leased by it.
True, correct
and complete copies of the Articles of Incorporation, Bylaws and other
organizational documents of the Company, each as in effect on the date
hereof,
have been delivered to Parent. The Company is not in
violation of the
provisions of its Articles of Incorporation or Bylaws. The
Company is
duly licensed or qualified to do business as a foreign corporation and
is in
good standing as a foreign corporation in each jurisdiction in which
the
properties or assets owned, operated or leased by it, the operation of
its
business or its other activities requires such licensing or
qualification.
3.2
Subsidiaries.
The Company has no subsidiaries.
3.3
Capitalization.
The authorized capital stock of the Company consists of 1,000,000
shares of
common stock, without par value, of which 1,000 shares are issued and
outstanding as of the date hereof. The issued and outstanding
shares of
the Company's capital stock have been duly authorized and validly
issued, are
fully paid and nonassessable, were issued in compliance with all
applicable
federal and state securities Laws, and are held of record by the
Stockholders
in the amounts set forth in Schedule 3.3 and
beneficially by the
beneficiaries of the Stockholders as set forth in Schedule 3.3
, and
none of such shares have been issued in violation of any preemptive
rights of
any stockholder or transferred in violation of any transfer
restrictions
relating thereto. No Person has any option, warrant,
convertible security
or other right to acquire any shares of capital stock of the Company or
to
cause the Company to issue or sell any such shares, and the Company is
not
obligated to issue any such option, warrant or right. No
Person other
than the Stockholders has asserted that they hold, are entitled to hold
or to
acquire (whether from the Company or from any other Person), or
entitled to
cause the Company to issue any option, warrant, convertible security or
other
right issuable or exercisable for shares of capital stock of the
Company and,
to the Company's Knowledge, there is no circumstance or condition that
may give
rise to a valid claim by any such Person. The Company is not
a party to
any option plan or similar plan obligating the Company, directly or
indirectly,
to issue stock or options, warrants, convertible securities or other
rights
issuable or exercisable for shares of capital stock of the Company, nor
any
stock appreciation, phantom stock, profit participation or similar
rights. Except for this Agreement, neither the Company nor
any
Stockholder is party to any stockholder agreement, voting agreement,
voting
trust or any other arrangement with respect to the transfer, voting or
other
rights associated with its capital stock. The Company does
not have any
obligation to repurchase or redeem any of its outstanding capital
stock.
The Company does not have any outstanding bonds, debentures, notes or
other obligations
or debt securities the holders of which have the right to vote, or are
convertible into, or exercisable or exchangeable for, Company
securities having
the right to vote on any matter.
3.4
Due Authorization.
(a)
The Company. The Company has
full requisite corporate power
and authority to execute and deliver this Agreement and each of the
other
Transaction Documents which it is required to execute and
deliver and to
perform all obligations to be performed by it hereunder and
thereunder.
The execution and delivery of this Agreement and, as applicable, the
other
Transaction Documents and the consummation of the transactions
contemplated
hereby and thereby have been and will be, as the case may be, duly and
validly
authorized and approved by all necessary corporate action on the part
of the
Company and its Stockholders and no other proceeding on its part is
necessary
to authorize this Agreement and the consummation of the transactions
contemplated hereby and thereby.
(b)
Stockholders. Each Stockholder
has full requisite power and
authority to execute and deliver this Agreement and each of the other
Transaction Documents which it is required to execute and to perform
all
obligations to be performed by it hereunder and thereunder.
The execution
and delivery of this Agreement and, as applicable, the other
Transaction
Documents and the consummation of the transactions contemplated hereby
and
thereby have been and will be, as the case may be, duly and validly
authorized
and approved by all necessary action on the part of such Stockholder
and no
other proceeding on its part or on the part of any trustee thereof is
necessary
to authorize this Agreement and the consummation of the transactions
contemplated hereby and thereby.
(c)
Valid Execution. This Agreement
and the other Transaction
Documents has been duly and validly executed and delivered by, as
applicable,
each of the Company, the Stockholders and Xxxxxx, and, as applicable,
constitutes legally valid and binding obligations of each of them,
enforceable
against each of them in accordance with its terms, subject to
applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and
similar Laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.
3.5
No Conflict.
The execution, delivery and performance by each of the Company,
Stockholders
and Xxxxxx of this Agreement and, as applicable, the other Transaction
Documents and the consummation of the transactions contemplated hereby
and
thereby do not, and will not, directly or indirectly:
(a)
Violate or result in the breach of the Articles of
Incorporation or
Bylaws of the Company, or any trust agreement or instrument governing
any
Stockholder that is a trust;
(b)
assuming the making and obtaining of all filings,
notification, consents,
approvals, authorization and other actions referred to in Schedule
3.6:
(i)
violate or result in a violation of, or give any Governmental
Entity or
other Person the right to challenge any of the transactions
contemplated by
this Agreement or to exercise any remedy or obtain any relief under,
any Law or
any Court Order to which the Company, any Stockholder or Xxxxxx, or any
of the
assets owned or used by any of them, is subject;
(ii) violate
or result in a violation of any of the terms or requirements of, or
give any
Governmental Entity the right to revoke, withdraw, suspend, cancel,
terminate,
or modify, any Governmental Permit that is held by the Company, any
Stockholder
or Xxxxxx or that otherwise relates to the Business or to any of the
assets
owned or used by, the Company except to the extent that, with respect
to the
Governmental Permits listed on Schedule 3.21, Surviving Corporation may
be
required to obtain its own Governmental Permit;
(iii) cause
Parent or the Company to become subject to, or to become liable for,
the
payment of any stock transfer, intangible property transfer, real
property
transfer, sales, use, accumulated earnings or similar Tax (it being
acknowledged that Parent intends to include the Surviving Corporation
on
Parent's consolidated tax return with respect to periods after the
Effective
Time);
(iv) except
as set forth on Schedule 3.5, violate or result in
a violation or breach
of any provision of, or give any Person the right to declare a default
or
exercise any remedy under, or to accelerate the maturity or performance
of, or
to cancel, terminate, or modify, any Contract; or
(v)
result in the imposition or creation of any Encumbrance upon
the Company
Stock or upon any of the assets owned or used by the Company.
3.6
Government
Authorities; Consents. No notice to, consent,
approval or
authorization of, or designation, declaration or filing with, any
Governmental
Entity or other Person is required on the part of the Company, any
Stockholder,
Xxxxxx or any Affiliate of any of them with respect to the execution or
delivery of this Agreement or the consummation of the transactions
contemplated
hereby, except as otherwise disclosed in Schedule 3.6.
Each such
notice, consent, approval or authorization of, or designation,
declaration or
filing has been provided, obtained or made (as applicable) or will be
provided,
obtained or made prior to the Closing Date.
3.7
Financial
Statements, Books and Records.
(a)
True and complete copies of the Company's unaudited financial
statements
consisting of the balance sheet of the Company as at December 31, 2007
and
December 31, 2006 and the related statements of income for the years
then ended
(the "Full-Year Financial Statements"), and
unaudited
financial statements consisting of the balance sheet of the Company as
at
August 31, 2008 and the related statements of income for the eight (8)
month
period then ended (the "Interim Financial Statements"
and,
together with the Full-Year Financial Statements, the "Financial
Statements") are attached to Schedule 3.7.
(b)
The Financial Statements are true, correct and complete, and
the
Full-Year Financial Statements have been prepared in accordance with
accounting
principles applied on a consistent basis throughout the periods
involved.
The Financial Statements are based on the books and records of the
Company,
and, except as set forth in Schedule 3.7, fairly
present the financial
condition of the Company as of the respective dates they were prepared
and the
results of the operations of the Company for the periods
indicated. The
balance sheet of the Company as of December 31, 2007 is referred to
herein as
the "Balance Sheet" and the date thereof as the "Balance
Sheet Date", and the balance sheet of the Company as of
August 31,
2008 is referred to herein as the "Interim Balance Sheet"
and
the date thereof as the "Interim Balance Sheet Date".
(c)
There is and has been no fraud, whether or not material, that
involves
management or other employees who have a significant role in the
Company's
internal controls.
(d)
Except as set forth on Schedule 3.7, the
Company does not have and
has not had any off-balance sheet obligation or liability to, or any
financial
interest in, any third party, the purpose or effect of which is to
defer,
postpone, reduce, avoid or adjust recording of debt or expenses.
(e)
The books of account and other financial records of the
Company (i)
reflect in all material respects all items of income and expense and
all assets
and liabilities of the Company, (ii) are in all material respects
correct and
do not contain any material inaccuracies or discrepancies, (iii) have
been
maintained in accordance with good business and accounting practices,
and (iv)
have been provided to Parent for inspection.
(f)
The Company has not engaged in any monetary transaction,
maintained any
bank account or used any corporate funds except for monetary
transactions, bank
accounts or funds which have been and are reflected in the books and
records or
such as are not material to the results of operations or financial
condition of
the Company.
(g)
As of the Effective Time, the aggregate amount of the
Xxxxxx-Xxxxxx
Payables does not exceed $175,000 and, other than the Xxxxxx-Xxxxxx
Payables,
the Company has no payment obligation to Xxxx Xxxxxx, Xxxxx Xxxxxx or
any
Affiliate of either of them.
3.8
Undisclosed
Liabilities. Except as set forth on Schedule
3.8, the Company
does not have any material liabilities or obligations of any nature
whatsoever
(whether absolute or contingent, liquidated or unliquidated, or due or
to
become due) except for liabilities and obligations (a) fully reflected
in or
adequately reserved against on the Balance Sheet or (b) that have
arisen since
the date of the Balance Sheet in the ordinary course of business and
consistent
with past practices of the Company, which are not, individually or in
the
aggregate, materially different from those reflected in the Balance
Sheet. Except as set forth on Schedule 3.8,
the liabilities on the
Balance Sheet consist solely of obligations and liabilities incurred by
the
Company in the ordinary course of business consistent with past
practice to
Persons who are not Affiliates of the Company. Schedule
3.8
sets forth the maximum amount of each item listed or required to be
listed on
that schedule.
3.9
Accounts
Receivable. Schedule 3.9 sets
forth a true and correct list of
all accounts receivable and unbilled receivables (for products sold or
services
provided prior to the Closing Date) of the Company ("Accounts
Receivable") as of the Interim Balance Sheet Date.
All Accounts
Receivable as of the Interim Balance Sheet Date (other than those paid
since
such date) and that have arisen since the Interim Balance Sheet Date
represent
valid obligations and are not subject to any setoffs or counterclaims
of which
the Company has Knowledge. All Accounts Receivable as of the
Interim Balance
Sheet Date, as adjusted, or arising from the date thereof until the
Closing
Date (subject to the reserve for bad debts, if any, reflected on the
Interim
Balance Sheet) are owned by the Company free and clear of any
Encumbrance
(other than Permitted Encumbrances) and are collectible in the
aggregate face
amounts thereof, without resort to litigation or extraordinary
collection
activity, within one hundred twenty (120) days of the Closing
Date.
Except as set forth in Schedule 3.9, no Accounts
Receivable have been
outstanding for more than one hundred twenty (120) days. The
Company has
not received any written notice from an account debtor stating that any
Account
Receivable in an amount in excess of $5,000 is subject to any contest,
claim or
setoff by such account debtor. No discount or allowance from
any Accounts
Receivable has been made or agreed to (other than legal perquisites,
discounts
or allowances made in the ordinary course of business consistent with
industry
practices) and none represents xxxxxxxx prior to actual sale of goods
or
provision of services.
3.10
Absence of Certain Changes or Events.
Since the Balance Sheet
Date, except as set forth in Schedule 3.10:
(a)
There has not been any Material Adverse Change;
(b)
The Company has not amended or otherwise modified its
Articles of
Incorporation or Bylaws;
(c)
The Company has not declared, set aside or paid any dividend
or other
distribution (whether in cash, stock or property) with respect to any
of its
securities, excepting Subchapter S distributions consistent with
Company's
custom and practice;
(d)
The Company has not issued, or authorized for issuance any
securities or
any options, warrants, convertible notes or other rights to acquire
securities,
or split, combined or reclassified any of its securities;
(e)
The Company has not altered any term of any outstanding
securities;
(f)
Except in the ordinary course of business and consistent with
past
practices of the Company, the Company has not (i) increased or modified
the
compensation or benefits payable or to become payable to any of their
respective current or former directors, employees, contractors or
consultants,
(ii) increased or modified any bonus, severance, termination, pension,
insurance or other employee benefit plan, payment or arrangement made
to, for
or with any of its current or former directors, employees, contractors
or
consultants, (iii) entered into any employment, consulting, severance
or
termination agreement, or (iv) amended, modified, superseded, replaced
or
terminated any employment, consulting, severance or termination
agreement.
(g)
The Company has not sold, leased, transferred or assigned any
of its
properties or assets, except for the sale of products in the ordinary
course of
business consistent with past practice;
(h)
The Company has not incurred, assumed or guaranteed any
indebtedness, or
modified the terms of any indebtedness outstanding as of the Balance
Sheet
Date, with "indebtedness" excluding, for the avoidance of doubt,
obligations incurred to customers in connection with sales orders
received by
the Company;
(i)
The Company has not incurred any material liability or
created or assumed
any Encumbrance on any asset except for Permitted Encumbrances,
liabilities
incurred in the ordinary course of business and consistent with past
practices
of the Company, or liabilities incurred to service providers in
connection with
this Agreement and the Merger;
(j)
The Company has not made any loan, advance or capital
contribution to, or
investment in, any Person other than loans or advances in the ordinary
course
of business consistent with past practice;
(k)
(i) No Material Contract has been modified, (ii) no rights
under any
Material Contract have been waived or accelerated, and (iii) no
contract or
agreement that would be required to be listed as a Material Contract
pursuant
to Section 3.11 hereof if such contract or
agreement were in effect on
the date hereof has been terminated or cancelled;
(l)
The Company has not sold, transferred, pledged or assigned
any of its
intellectual property except for the grants to purchasers of the
Company's
products of non-exclusive licenses to software embodied in Company in
the
ordinary course of business;
(m)
There has not been any labor dispute or any activity or
proceeding by a
labor union or representative thereof to organize any employees of the
Company;
(n)
There has not been any violation of or conflict with any Law
to which the
business, operations, assets or properties of the Company are subject;
(o)
There has not been any material damage, destruction or loss
with respect
to the property and assets of the Company, whether or not covered by
insurance;
(p)
The Company has not made any change in accounting practices;
(q)
The Company has not made any Tax election, changed its method
of Tax
accounting or settled any claim for Taxes; or
(r)
The Company has not agreed, whether in writing or otherwise,
to do any of
the foregoing.
3.11
Contracts; No
Defaults.
(a)
Schedule 3.11 lists all of the
following contracts to which
the Company is a party or by which it or its assets or properties are
bound
(collectively, the "Material Contracts"):
(i)
Contracts with any current or former officer, director,
shareholder or
Affiliate of the Company;
(ii) Contracts
(other than at-will employment contracts that are terminable by the
Company at
any time without liability to the Company) for the employment of any
individual
on a full-time, part-time, consulting or other basis;
(iii) Collective
bargaining agreements or contracts with any labor union or association
representing any employee of the Company;
(iv) Contracts
for the sale of any of the assets of the Company other than in the
ordinary
course of business consistent with past practice or for the grant to
any Person
of any preferential rights to purchase any of its assets;
(v)
Contracts for joint ventures, strategic alliances,
partnerships,
licensing arrangements, or sharing of profits or proprietary
information;
(vi) Contracts
containing covenants of the Company not to compete in any line of
business or
with any Person in any geographical area or not to solicit or hire any
Person
with respect to employment or covenants of any other person not to
compete with
the Company in any line of business or in any geographical area or not
to
solicit or hire any Person with respect to employment;
(vii) Contracts
relating to the acquisition (by merger, purchase of stock or assets or
otherwise) by the Company of any operating business or material assets
or the
capital stock of any other Person;
(viii) Contracts
or instruments relating to the incurrence, assumption or guarantee of
any
indebtedness or imposing an Encumbrance on any of its assets, including
indentures, guarantees, loan or credit agreements, sale and leaseback
agreements, purchase money obligations incurred in connection with the
acquisition of property, mortgages, pledge agreements, security
agreements,
conditional sale or title retention agreements, notes, debentures,
bonds,
equipment trusts, or letters of credit;
(ix) Contracts
providing for payments by or to the Company in excess of $5,000 in any
fiscal
year or $10,000 in the aggregate during the term thereof, excluding
vendor
purchase orders where such purchase order is supported by a
corresponding order
placed by a customer with the Company;
(x)
Contracts obligating the Company to provide or obtain
products or
services for a period of one year or more;
(xi) Contracts
obligating the Company to purchase its total requirements of any
product or
service from a third party;
(xii) Contracts
under which the Company has made advances or loans to any other Person
other
than for reimbursement of expenses in the ordinary course of business;
(xiii) Contracts
providing for severance, retention, change in control or other similar
payments;
(xiv) Contracts
providing for guaranty, surety or indemnification (including, without
limitation, any obligation to indemnify any third party with respect to
intellectual
property matters), direct or indirect, by the Company, or any
undertaking by
the Company to be responsible for consequential damages, or the
assumption by
the Company of any Tax, environmental or other liability;
(xv) Distribution,
dealer, representative or sales agency agreements;
(xvi) Contracts
or leases pursuant to which the Company occupies or has the right to
occupy or
use real estate;
(xvii) Leases
of personal property;
(xviii) Contracts
with any Governmental Entity;
(xix) Contracts
that are otherwise material to the Company, taken as a whole.
(b)
Except as disclosed in Schedule 3.11, (i)
to the Knowledge of the
Company, no Material Contract has been breached or canceled by the
other party,
and the Company has no Knowledge of any anticipated breach by any other
party
to any Material Contract, (ii) the Company has performed in all
material
respects all of its obligations under and is not in material breach or
default
of or under any Material Contract, and no event has occurred which,
with the
passage of time or the giving of notice or both, would result in a
default or
breach thereunder, (iii) the Company does not have a present
expectation or
intention of not fully performing any obligation pursuant to any
Material
Contract, and (iv) each Material Contract is legal, valid, binding,
enforceable
(except as such enforceability may be limited by bankruptcy,
insolvency, reorganization,
moratorium or other similar Laws affecting or relating to creditors'
rights
generally, and the availability of injunctive relief and other
equitable
remedies) and in full force and effect and will continue as such
following the
consummation of the transactions contemplated hereby.
(c)
The Company has provided to Parent a true and correct copy of
all written
Material Contracts, in each case together with all amendments, waivers
or other
changes thereto (all of which are disclosed on Schedule 3.11).
Schedule
3.11 contains an accurate and complete description of all
material terms of
all oral Material Contracts.
3.12
Real Property.
(a)
The Company is a party to a real estate lease dated May 6,
2005 (the
"Real Estate Lease") pursuant to which the Company
leases its
business premises located in El Cajon, California (the "Leased
Premises").
The Company is the owner of good leasehold title to the Leased
Premises, free
and clear of all Encumbrances and other matters affecting title,
excepting any
Encumbrances that are part of the public record. Other than
the Leased
Premises, the Company is not a party to any lease of real estate or any
other
agreement with respect to the tenancy, use or occupancy of real
estate.
No Person has any right or option to purchase or acquire any of
Company's
leasehold interest in the Leased Premises.
(b)
The Company has delivered to Parent a true and complete copy
of the Real
Estate Lease (including any amendments or modifications thereto) and
any and
all material ancillary documents pertaining thereto (including all
master
leases or prime leases to which the Real Estate Lease is
subordinate).
The Company has peaceful, undisturbed and exclusive possession of the
Leased
Premises, as described in the Real Estate Lease.
(c)
The Company does not own any real property. Schedule
3.12(c)
lists all real property formerly owned by the Company since December
31, 2005.
(d)
To the Company's Knowledge, the uses for which the buildings,
facilities
and other improvements located on the Leased Premises are zoned do not
materially restrict, or materially impair, the use of the Leased
Premises for
purposes of the Business. The Company has not received any
written notice
from any Governmental Entity or other Person that the Leased Premises
does not
comply with all applicable material building and zoning codes, deed
restrictions, ordinances and rules.
(e)
No Governmental Entity having the power of eminent domain
over the Leased
Premises has commenced or, to the Company's Knowledge, intends to
exercise the
power of eminent domain or a similar power with respect to all or any
part of
the Leased Premises. There are no pending or, to the Company's
Knowledge,
threatened condemnation, fire, health, safety, building, zoning or
other land
use regulatory proceedings, lawsuits or administrative actions relating
to any
portion of the Leased Premises or any other matters which do or may
adversely effect
the current use, occupancy or value thereof. The Company has
not received
written notice of any pending or threatened special assessment
proceedings
affecting any portion of the Leased Premises.
(f)
To the Company's Knowledge, the Leased Premises and all
present uses and
operations of the Leased Premises comply in all material respects with
all
Laws, governmental permits, covenants, conditions, restrictions,
easements,
disposition agreements and similar matters affecting the Leased
Premises. The
continued use, occupancy and operation of the Leased Premises as
currently
used, occupied and operated do not constitute a nonconforming use and
are not
the subject of a special use permit under any Law.
(g)
To the Company's Knowledge, the Leased Premises are in
suitable condition
for the business of the Company as currently conducted. To its
Knowledge, the
Company has good and valid rights of ingress and egress to and from the
Leased
Premises from and to the public street systems for all usual street,
road and
utility purposes.
(h)
No Person other than the Company is in possession of any of
the Leased
Premises or any portion thereof, and there are no leases, subleases,
licenses,
concessions or other agreements, written or oral, granting to any
Person other
than the Company the right of use or occupancy of the Leased Premises
or any
portion thereof. To the Company's Knowledge, no easement,
utility
transmission line or water main located on the Leased Premises
adversely
affects the use of the Leased Premises or any improvement on the Leased
Premises in any material respect.
(i)
To the Company's Knowledge, all water, sewer, gas, electric,
telephone
and drainage facilities, and all other utilities required by any Law or
necessary for the current use and operation of the Leased Premises are
installed to the property lines of the Leased Premises, are connected
pursuant
to valid permits to municipal or public utility services or proper
drainage
facilities, are fully operable and adequate to service the Leased
Premises in
the operation of the business as currently conducted and to permit
compliance
with the requirements of all Laws in the operation thereof.
To the
Company's Knowledge, no fact or condition exists which would result in
the
termination or reduction of the current access from the Leased Premises
to
existing roads or to sewer or other utility services presently serving
the
Leased Premises.
3.13
Tangible Personal
Property. The tangible personal property listed on Schedule
3.13-A
(the "Owned Tangible Personal Property") is owned by
the
Company free and clear of all Encumbrances other than Permitted
Encumbrances,
is located at the Leased Premises, and (together with the Leased
Tangible Personal
Property) constitutes all of the tangible personal property used by the
Company
in connection with the Business. The tangible personal
property listed on
Schedule 3.13-B (the "Leased Tangible
Personal Property"
and, together with the Owned Tangible Personal Property, the "Tangible
Personal Property") constitutes all of the tangible personal
property
leased by the Company in connection with the Business (all of which
leases are
in full force and effect, constitute valid and binding obligations of
the other
party or parties thereto, and there does not exist any breach or
default under
any of the leases on the part of the Company or, to the Company's
Knowledge,
any other party thereto). At all times since the date of the
Balance
Sheet, the Company has caused the Tangible Personal Property to be
maintained
in accordance with its customary business practice, and all of the
items of
Tangible Personal Property material to the operations or business of
the
Company are (i) in good operating condition and repair except as noted
on Schedule
3.13-A or 3.13-B and except for
reasonable wear and tear, and (ii)
suitable for the purposes for which they are used.
3.14
Intellectual
Property.
(a)
As used in this Agreement, "Intellectual Property"
means: (i) inventions (whether or not patentable), trade secrets,
technical
data, databases, customer lists, designs, tools, methods, processes,
technology, ideas, know-how, source code, product road maps and other
proprietary information and materials ("Proprietary Information");
(ii) trademarks and service marks (whether or not registered), trade
names,
logos, trade dress and other proprietary indicia and all goodwill
associated
therewith; (iii) documentation, advertising copy, marketing materials,
web-sites,
specifications, mask works, drawings, graphics, databases, recordings
and other
works of authorship, whether or not protected by Copyright; (iv)
computer
programs, including any and all software implementations of algorithms,
models
and methodologies, whether in source code or object code, design
documents,
flow-charts, user manuals and training materials relating thereto and
any
translations thereof (collectively, "Software"); and
(v) all
forms of legal rights and protections that may be obtained for, or may
pertain
to, the Intellectual Property set forth in clauses (i) through (iv) in
any
country of the world ("Intellectual Property Rights"),
including all patents, patent applications, invention disclosures and
other
rights to inventions or designs ("Patents"), all
registered
and unregistered copyrights in both published and unpublished works ("Copyrights"),
all trademarks, service marks and other proprietary indicia (whether or
not
registered) ("Marks"), trade secret rights, mask
works, moral
rights or other literary property or authors rights, and all
applications,
registrations, issuances, divisions, continuations, renewals,
reissuances and
extensions of the foregoing.
(b)
Schedule 3.14-B lists (by name, owner and,
where applicable,
registration number and jurisdiction of registration, application,
certification or filing) all Intellectual Property that is owned by the
Company
(whether exclusively, jointly with another Person or otherwise) ("Company
Owned Intellectual Property"); provided
that Schedule 3.14-B
is not required to list, and Company Owned Intellectual Property shall
not be
deemed to include, items which are both (i) immaterial to the Company
and (ii)
not registered or the subject of an application for registration.
Except as
described in Schedule 3.14-B, the Company
exclusively owns the entire
right, title and interest to all Company Owned Intellectual Property
free and
clear of all Encumbrances.
(c)
Schedule 3.14-C lists all licenses,
sublicenses and other
contracts ("In-Bound Licenses") pursuant to which a
third
party authorizes the Company to use, practice any rights under, or
grant
sublicenses with respect to, any Intellectual Property owned by such
third
party, including the incorporation of any such Intellectual Property
into the
Company's products and, with respect to each In-Bound License, whether
the
In-Bound License is exclusive or non-exclusive; provided,
however,
that Schedule 3.14-C is not required to list items
that consist solely
of "shrink-wrap", "click-wrap" and similar off-the-shelf
commercially available end-user licenses that are not material to
Company's
Intellectual Property Rights, service offerings or business.
(d)
Schedule 3.14-D lists all licenses,
sublicenses and other
contracts ("Out-Bound Licenses") pursuant to which
the Company
authorizes a third party to use, practice any rights under, or grant
sublicenses with respect to, any Company Owned Intellectual Property or
pursuant to which the Company grants rights to use or practice any
rights under
any Intellectual Property owned by a third party and, with respect to
each
Out-Bound License, whether the Out-Bound License is exclusive or
non-exclusive,
except for "shrink-wrap" or "click-wrap" licenses to Software
that constitute Company Owned Intellectual Property if such Software is
embodied in the Company's products and such licenses are in accordance
with the
Company's customary form, a copy of which has been provided to Parent.
(e)
The Company (i) owns exclusively the entire right, interest
and title to
all Intellectual Property that is used in or necessary for the
businesses of
the Company as they are currently conducted or proposed by the Company
to be
conducted free and clear of Encumbrances (including the design,
manufacture,
license and sale of all products currently under development or in
production),
or (ii) otherwise rightfully uses or otherwise enjoys such Intellectual
Property pursuant to the terms of a valid and enforceable In-Bound
License that
is listed Schedule 3.14-C. The Company
Owned Intellectual
Property, together with the Company's rights under the In-Bound
Licenses listed
on Schedule 3.14-C, together with items expressly
permitted to be
excluded from the foregoing categories (collectively, the "Company
Intellectual Property"), constitutes all of the Intellectual
Property
used in or necessary for the operation of the Company's businesses as
they are
currently conducted and as proposed by the Company to be conducted.
(f)
All registration, maintenance and renewal fees related to
Patents, Marks,
Copyrights and any other certifications, filings or registrations that
are
owned by the Company ("Company Registered Items")
that are
currently due have been paid and all documents and certificates related
to such
Company Registered Items have been filed with the relevant Governmental
Entity
or other authorities in the United States or foreign jurisdictions, as
the case
may be, for the purposes of maintaining such Company Registered
Items.
All Company Registered Items are in good standing, held in compliance
with all
applicable legal requirements and enforceable by the Company.
To the
Company's knowledge, all Patents that have been issued to the Company
are valid.
(g)
The Company is not aware of any challenges (or any basis
therefor) with
respect to the validity or enforceability of any Company Intellectual
Property.
Schedule 3.14-G lists the status of any actions
before the United States
Patent and Trademark Office or any other Governmental Entity anywhere
in the
world related to any of the Company Intellectual Property, including
the due
date for any outstanding response by the Company in such
actions. The
Company has not taken any action or failed to take any action that
would
reasonably be expected to result in the abandonment, cancellation,
forfeiture,
relinquishment, invalidation, waiver or unenforceability of any Company
Intellectual Property. Schedule 3.14-G lists all
previously held Company
Registered Items that the Company has abandoned, cancelled, forfeited
or
relinquished during the 12 months prior to the date of this Agreement.
(h)
(i) None of the products or services currently developed
manufactured,
sold, distributed, provided, shipped or licensed, by the Company, or
which are
currently under development, has infringed or infringes upon, or
otherwise
unlawfully used or uses, the Intellectual Property Rights of any third
party;
(ii) the Company has not, by conducting its business as currently
conducted,
infringed and is not infringing upon, and has not otherwise unlawfully
used or
is unlawfully using, any Intellectual Property Rights of a third party;
(iii)
the Company has not received any communication alleging that the
Company or any
of its products, services, activities or operations infringe upon or
otherwise
unlawfully use any Intellectual Property Rights of a third party nor,
to the
Company's Knowledge, is there any basis therefor; (iv) no Action has
been
instituted, or, to the Company's Knowledge, threatened, relating to any
Intellectual Property formerly or currently used by the Company and
none of the
Company Intellectual Property is subject to any outstanding
Order. To the
Company's Knowledge, no Person has infringed or is infringing any
Intellectual
Property Rights of the Company or has otherwise misappropriated or is
otherwise
misappropriating any Company Intellectual Property.
(i)
The Company has taken commercially reasonable steps to
protect and preserve
the confidentiality of all Proprietary Information owned by the Company
that is
not covered by an issued Patent, including but not limited to having a
policy
that third parties who are given or have access to Proprietary
Information
owned by the Company are to enter into binding written confidentiality
agreements between the Company and such third party ("Nondisclosure
Agreements"). True and complete copies of the
Nondisclosure
Agreements, and any amendments thereto, have been provided to Parent.
The
Company is, and to the Company's Knowledge, all other parties thereto
are, in
compliance with the provisions of the Nondisclosure
Agreements. The
Company is in compliance with the terms of all Contracts pursuant to
which a
third party has disclosed to, or authorized the Company to use,
Proprietary
Information owned by such third party.
(j)
No current or former employee, consultant or contractor or
any other
Person has any right, claim or interest to any Intellectual Property
owned or used
by the Company or embodied or incorporated into any of its
Products. All
Intellectual Property conceived by such employees, consultants or
contractors
in connection with their services for the Company constitutes Company
Owned
Intellectual Property.
(k)
To the Company's Knowledge, no employee, consultant or
contractor of the
Company has been, is or will be, by performing services for the
Company, in
violation of any term of any employment, invention disclosure or
assignment,
confidentiality, noncompetition agreement or other restrictive covenant
or any
Order as a result of such employee's, consultant's or independent
contractor's
employment by the Company or any services rendered by such employee,
consultant
or independent contractor.
(l)
All Intellectual Property that has been distributed, sold or
licensed to
a third party by the Company that is covered by a warranty conformed
and
conforms to, and performed or performs in accordance with, the
representations
and warranties provided with respect to such Intellectual Property by
or on
behalf of the Company for the time period during which such
representations and
warranties apply
(m)
The execution and delivery of this Agreement by the Company
does not, and
the consummation of the transactions contemplated by this Agreement (in
each
case, with or without the giving of notice or lapse of time, or both),
will
not, directly or indirectly, result in the loss or impairment of, or
give rise
to any right of any third party to terminate or re-price or otherwise
renegotiate any of the Company's rights to own any of its Intellectual
Property
or their respective rights under any Out-Bound License or In-Bound
License, nor
require the consent of any Governmental Entity or other third party in
respect
of any such Intellectual Property.
(n)
Software.
(i)
The Software owned, or purported to be owned by the Company
(collectively, the "Company Owned Software"), was
either (A)
developed by employees of the Company within the scope of their
employment by
the Company, (B) developed by independent contractors who have assigned
all of
their right, title and interest therein to the Company pursuant to
written
agreements or (C) otherwise acquired by the Company from a third party
pursuant
to a written agreement in which such third party assigns all of its
right,
title and interest therein. None of the Company Owned
Software contains
any programming code, documentation or other materials or development
environments that embody Intellectual Property Rights of any person
other than
the Company, other than such materials obtained by the Company from
other
Persons who make such materials generally available to all interested
purchasers or end-users on standard commercial terms or otherwise
rightfully
licensed.
(ii) Each
of the Company's existing and currently supported and marketed Software
products performs, in all material respects, the functions described in
any
agreed specifications or end-user documentation or other information
provided
to customers of the Company, on which such customers relied when
licensing or
otherwise acquiring such products, subject only to routine bugs and
errors,
that can be corrected promptly by the Company in the course of
providing
customer support without further liability to the Company, and all of
the code,
including both object and source code, of such products has been
developed in a
manner that meets common industry practice. Each of
the Company's
existing and currently supported and marketed Software products is free
of all
viruses, worms, trojan horses and material known contaminants and does
not
contain any bugs, errors, or problems that would substantially disrupt
its
operation or have a substantial adverse impact on the operation of the
Software.
(iii) The
Company has taken all actions customary in the software industry to
document
the Software and its operation, such that the materials comprising the
Software, including the source code and documentation, have been
written in a
clear and professional manner so that they may be understood, modified
and
maintained in an efficient manner by reasonably competent programmers.
(iv) The
Company has not exported or transmitted Software or other material in
connection with the Company's business to any country to which such
export or
transmission is restricted by any applicable Law, without first having
obtained
all necessary and appropriate authorizations.
3.15
Litigation and
Proceedings. Except as set forth on Schedule
3.15, there are
no lawsuits, Actions, suits, claims, investigations or other
proceedings
pending or, to the Knowledge of the Company, threatened, against the
Company. There is no Order or any open injunction binding
upon the
Company that could be reasonably expected to have a Material Adverse
Effect or
delay, in any respect, consummation of the transactions contemplated
hereby. There is no pending, or to the Knowledge of the
Company,
threatened Action or proceeding applicable to the Company or its
assets, by or
before any Governmental Entity seeking to restrain or invalidate all or
any
portion of the transactions contemplated hereunder. Schedule
3.15
contains a description of all material lawsuits, actions, suits,
claims,
investigations and other proceedings involving the Company, and to the
Knowledge of the Company, any employee, officer, director, officer,
stockholder
or consultant of the Company in connection with the Business, arising
or
existing at any time during the past five (5) years.
3.16
Employee Benefit
Plans.
(a)
Schedule 3.16(a) sets forth a list of each
defined benefit and
defined contribution plan, stock ownership plan, executive compensation
program
or arrangement, bonus plan, incentive compensation plan or arrangement,
profit
sharing plan or arrangement, deferred compensation agreement or
arrangement,
supplemental retirement plan or arrangement, vacation pay, sickness,
disability, or death benefit plan (whether provided through insurance,
on a
funded or unfunded basis, or otherwise), medical or life insurance plan
providing benefits to any of the Company's employees, retirees, or
former
employees or any of their dependents, survivors, or beneficiaries,
employee
stock option or stock purchase plan, severance pay, termination, salary
continuation or employee assistance plan, and each other employee
benefit plan,
program, or arrangement, including without limitation each "employee
benefit
plan" within the meaning of Section 3(3) of the Employee Retirement
Income
Security Act of 1974, as amended ("ERISA"), that is
maintained
by the Company for the benefit of or relating to any of its employees
or former
employees or their dependents, survivors, or beneficiaries, whether or
not
legally binding, and for which the Company could reasonably have any
liabilities, all of which are hereinafter referred to as the "Company
Benefit Plans."
(b)
Neither Parent nor the Company will incur any liability under
any
severance agreement, deferred compensation agreement, employment
agreement,
similar agreement, or Company Benefit Plan solely as a result of the
consummation of the transactions contemplated by this Agreement.
(c)
Except as set forth on Schedule 3.16(c),
each Company Benefit Plan
that is an "employee pension benefit plan" (as defined in Section
3(2) of ERISA) that is not intended to be a nonqualified deferred
compensation
plan meets the requirements of Section 401(a) of the Code; the trust,
if any,
forming part of such plan is exempt from U.S. federal income tax under
Section
501(a) of the Code; a favorable determination letter has been issued by
the
Internal Revenue Service after January 1, 2002, and takes into account
the
series of legislation commonly referred to as "GUST"
(or, if
the plan is documented on a prototype, such prototype is currently
approved by
the Internal Revenue Service (IRS) and takes "GUST" into account),
with respect to each plan and trust and each amendment thereto or such
plan and
trust and/or amendment are covered under the remedial amendment period
provided
under Code Section 401(b); and since the date of such determination
letter
there are no circumstances that are likely to adversely affect the
qualification of such plans, excepting changes in the law.
Any employee
pension benefit plan intended to meet the requirements of Section
401(a) has
been amended in good faith to comply with any provisions of the
Economic Growth
and Tax Relief Reconciliation Act of 2001 ("EGTRRA")
and, to
the extent required to be filed before the Closing Date, the Pension
Protection
Act of 2006 ("PPA") that are instituted voluntarily
by the end
of the plan year in which such changed provision is
effective. In addition,
the Company has not received any correspondence or written or verbal
notice
from the IRS, the U.S. Department of the Treasury, the Employee
Benefits
Security Administration, any participant in, or beneficiary of, a
Company
Benefit Plan, or any agent representing any of the foregoing that
brings into
question the Company's compliance referred to in this Section.
(d)
To the Company's Knowledge, no tax liabilities have arisen
and are
currently unpaid in relation to a violation of any applicable Company
Benefit
Plan of Section 409A of the Code, nor is any tax liability expected to
arise in
connection with any payment as a result of the transaction contemplated
in this
Agreement. All Company Benefit Plans subject to Section 409A
of the Code
have been documented to conform to such Section.
(e)
Except for temporary clerical or security personnel and
except as set
forth on Schedule 3.16(e), none of the Company's
employees is a
"leased employee" within the meaning of Section 414(n) of the Code.
(f)
No Company Benefit Plan is a "voluntary employees beneficiary
association" (within the meaning of Section 501(c)(9) of the Code), and
since January 1, 1988, there have been no other "welfare benefit
funds" relating to employees or former employees within the meaning of
Section 419 of the Code.
(g)
No event or condition exists with respect to any Company
Benefit Plan
that could subject the Company to any material tax under Section 4980B
of the Code.
(h)
With respect to each Company Benefit Plan, the Company has
previously
delivered to Parent complete and correct copies of the following
documents, where
applicable: (i) the most recent annual report (Form 5500),
together with
schedules, as required, filed with the IRS or Department of Labor
(DOL), as
applicable, and any financial statements and opinions required by
Section
103(a)(3) of ERISA or, for each top-hat plan, a copy of all filings
with the
DOL, (ii) the most recent determination letter issued by the IRS, (iii)
the
most recent summary plan description and all modifications, (iv) the
text of
the Company Benefit Plan and of any trust, insurance, or annuity
contracts
maintained in connection therewith, (v) the most recent actuarial
report, if
any, relating to the Company Benefit Plan, (vi) the most recent
actuarial
valuation, study, or estimate of any retiree medical and life insurance
benefits plan or supplemental retirement benefits plan, and (vii) any
documents
with any third party administrator or consultant with respect to the
Company
Benefit Plan.
(i)
All required reports and descriptions (including but not
limited to Form
5500 annual reports and required attachments (including but not limited
to any
required independent audit), Forms 1099-R, summary annual reports,
Forms
PBGC-1, and summary plan descriptions) have been filed or distributed
appropriately with respect to each Company Benefit Plan and copies
thereof have
been provided to Parent. All required tax filings with
respect to each
Company Benefit Plan have been made, including but not limited to IRS
Forms
990-T and 5330, and any taxes due in connection with such filings have
been
paid and copies of such filings have been provided to Parent.
(j)
The Company does not maintain or contribute to or in any way
directly or
indirectly have any liability (whether contingent or otherwise) with
respect to
any "multi-employer plan," within the meaning of Section 3(37) or
4001(a)(3) of ERISA.
(k)
No Company Benefit Plan of the Company is subject to Title IV
of
ERISA. No contingent or other liability with respect to which
Seller has
or could have any liability exists under Title IV of ERISA to the
Pension
Benefit Guaranty Corporation (the "PBGC") or to any
Company
Benefit Plan or any plan sponsored by an employee organization that
provides
benefits to the Company's employees, and no assets of the Company are
subject
to a lien under Section 4064 or 4068 of ERISA.
(l)
Except as set forth on Schedule 3.16(l)-A,
all contributions
(including all employer contributions and employee salary reduction
contributions) required to be made to or with respect to each Company
Benefit
Plan with respect to the service of employees or former employees of
the
Company as of the Closing Date and all contributions for any period
ending on
or before the Closing Date that are not yet due have been made or have
been
accrued for in the Company's books and records. All Company
Benefit Plans
are in compliance with Code Section 412, to the extent that it is
applicable to
the Plan. Except as set forth on Schedule 3.16(l)-B,
the assets
under each Company Benefit Plan that is an Employee Pension Benefit
Plan (as
such term is defined in ERISA Section 3(2)) equal or exceed the present
value
of all vested and unvested liabilities thereunder, as determined in
accordance
with the terms of such Plan, the Code, ERISA, and, to the extent
applicable,
PBGC methods, factors, and assumptions applicable to Employee Pension
Benefit
Plans on the date of such determination.
(m)
Except as set forth on Schedule 3.16(m),
the Company has no
obligation to provide postretirement medical or other benefits to the
Company's
employees or former employees or their survivors, dependents, and
beneficiaries, except as may be required by Section 4980B of the Code
or Part 6
of Title I of ERISA or applicable state medial benefits continuation
law, and
the Company may terminate any such postretirement medical or other
benefits
upon thirty (30) days' notice or less without any liability therefore.
(n)
Except as set forth on Schedule 3.16(n),
there have been no
"prohibited transactions" within the meaning of Section 4975 of the
Code or Part 4 of Subtitle B of Title I of ERISA in connection with any
of the
Company Benefit Plans that, assuming the taxable period of such
transaction
expired as of the date hereof, could subject the Company to a tax or
penalty
imposed by either Section 4975 of the Code or Section 502(i) of ERISA;
each
Company Benefit Plan has been administered to date in all material
respects in
accordance with the applicable provisions of ERISA, the Code, and
applicable
law and with the terms and provisions of all documents, contracts, or
agreements
pursuant to which such Company Benefit Plan is maintained; all reports
and
information required to be filed with the DOL, the IRS, or the PBGC
with
respect to any Company Benefit Plan have been timely filed or
delivered; there
is no arbitration, claim, or suit pending or, to the Company's
Knowledge,
threatened, involving a Company Benefit Plan (other than routine claims
for
benefits), and there is no basis for such a claim; and none of the
Company
Benefit Plans nor any fiduciary thereof has been the direct or indirect
subject
of an order or investigation or examination by a governmental or
quasi-governmental agency, and there are no matters pending before the
IRS, the
DOL, or any other governmental agency with respect to a Company Benefit
Plan.
(o)
The Company does not have any obligation to any former
employee, or any
current employee upon retirement, under any Company Benefit Plan or
otherwise,
other than those disclosed in the Schedules hereto, and any Company
Benefit
Plan can be terminated as of or after the Effective Time without
resulting in
any liability to Parent for any additional contributions, penalties,
premiums,
fees, fines, excise taxes, or any other charges or liabilities.
3.17
Employees; Labor
Relations.
(a)
Schedule 3.17 contains (i) a true, correct
and complete list of
the name, position and current rate of compensation of each current
employee of
the Company (including bonus, commission, deferred compensation
arrangements,
classification of status as exempt/non-exempt and years of services),
and (ii)
to the extent not covered by the preceding item (i), a true, correct
and
complete list of individuals who are currently performing services for
the
Company related to the Business, including individuals who are
classified as
consultants or independent contractors (copies of the agreements
between the
Company and such individuals are disclosed on Schedule 3.11).
Except as set forth on Schedule 3.17, the Company
has not entered into
any severance or similar arrangement in respect of any present employee
of the
Company that will result in any obligation (absolute or contingent) of
the
Company to make any payment to any present employee of the Company
following
termination of employment. Except as set forth on Schedule
3.17,
the Company has no liability to any current or former employee for
accrued,
earned and unused vacation, sick, personal or other compensable days,
and the
amounts shown as accrued vacation on Schedule 3.17
are accrued on the Company's
accounting records as of the Closing Date.
(b)
The Company is not a party to any collective bargaining or
other labor
union agreement. The Contracts listed on Schedule
3.11 also
include all written employment or severance agreements to which the
Company is
a party with respect to any employee or former employee, and that
schedule
specifies which of such contracts may not be terminated at will, or by
giving
notice of 30 days or less, without cost or penalty. The
Company has not
engaged in any unfair labor practice and there are no complaints
against the
Company pending before the National Labor Relations Board or any
similar state
or local labor agency by or on behalf of any employee of the
Company.
There are no representation questions, arbitration proceedings, labor
strikes,
slow downs or stoppages, grievances or other labor disputes pending or,
to the
Knowledge of the Company, threatened with respect to the employees of
the
Company, and the Company has not experienced any attempt by organized
labor to
cause the Company to comply or conform to demands of organized labor
relating
to its employees over the past five (5) years.
(c)
Except as set forth on Schedule 3.17, no
workers' compensation
claims have been filed since December 31, 2007 and no such claims are
now
outstanding, open or pending. The Company has complied in all
material
respects with all applicable Laws relating to employment, equal
employment
opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective
bargaining, the payment of social security and similar taxes,
occupational
safety and health and plant closings (hereinafter collectively referred
to as
the "Employment Laws"). The Company has not been adjudged
liable
for the payment of taxes, fines, penalties or other amounts, however
designated, for failure to comply with any of the foregoing Employment
Laws.
(d)
The Company has paid or properly accrued in the ordinary
course of
business all wages and compensation due to employees, including all
vacations
or vacation pay, holidays or holiday pay, sick days or sick pay, and
bonuses.
(e)
The Company is not a party to any contract which restricts
the Company
from relocating, closing or terminating any of its operations or
facilities or
any portion thereof. The Company has not since January 1,
2004
effectuated a "plant closing" (as defined in the Worker Adjustment
and Retraining Notification Act of 1988 (the "WARN Act"))
or
(ii) a "mass lay-off" (as defined in the WARN Act), in either case
affecting any site of employment or facility of the Company, except in
accordance with the WARN Act.
(f)
The Company is in compliance with all "affirmative action"
requirements to which it is subject, whether by operation of Law, to
remain
eligible to do business with any Governmental Entity or any other
Person, or by
reason of any requirement imposed by the Real Estate Lease or any other
agreement or contract to which the Company is a party or to which any
of its
assets are subject.
(g)
The Company has complied, and is in compliance, in all
material respects
with the requirements of the Immigration Reform and Control Act of
1986. Schedule
3.17 sets forth a true and complete list of all employees
working in the United States who are not U.S. citizens and a
description of the legal
status under which each such employee is permitted to work in the
United States.
3.18
Legal Compliance.
The Company is, and at all times during the past three (3) years has
been, in
compliance in all material respects with all applicable Laws and has
not,
during such time: (i) received any written notice or other
communication from
any Governmental Entity or any other Person regarding (A) any actual,
alleged,
possible, or potential violation of, or failure to comply with, any
Law, or (B)
any actual, alleged, possible, or potential obligation on the part of
the
Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature, or (ii) conducted any internal
investigation
concerning any alleged violation of any Law (regardless of the outcome
of such
investigation).
3.19
Environmental
Matters.
(a)
For purposes of this Section and the defined terms used
herein, the term
"Company" shall include (i) the Company, and (ii)
all
predecessor or former corporations, partnerships, joint ventures,
organizations, businesses or other entities, whether in existence as of
the
date hereof or at any time prior to the date hereof, the assets or
obligations
of which have been acquired or assumed by the Company or to which the
Company
has succeeded.
(b)
The Company: (i) is, and at all times has been, in compliance
in all
material respects with all applicable Environmental Laws; (ii) holds,
and at
all pertinent times has held, all Environmental Permits (each of which
is in
full force and effect) required for any current or intended operations
or for
any property owned, leased or otherwise operated; and (iii) is, and at
all
times has been, in compliance in all material respects with all of
their
Environmental Permits; except to the extent any of said items would
not, in the
aggregate, have a Material Adverse Effect.
(c)
The Company has not received any written notice of alleged,
actual or
potential responsibility for, or any inquiry or investigation
regarding, any
Pre-Closing Environmental Condition. The Company has not
received any
written notice of any other claim, demand or Action by any individual
or entity
alleging any actual or threatened injury or damage to any person,
property,
natural resource or the environment or otherwise alleging liability of
the
Company arising from or relating to any Release or threatened Release
of any
Hazardous Materials at, on, under, in, to or from the Leased Premises
or any
former facilities, or in connection with any operations or activities
of the
Company, nor, to the Company's Knowledge, are there facts or
circumstances that
might support such a claim, demand or Action.
(d)
The Company has not entered into or agreed to any consent
decree, Order,
settlement or other agreement, nor is it subject to any judgment,
decree, Order
or other agreement, in any judicial, administrative, arbitral, or other
forum,
relating to compliance with or liability under any Environmental Law.
(e)
The Company has not received a CERCLA 104(e) information
request nor has
the Company been named a potentially responsible party for any National
Priorities List site under CERCLA or any site under analogous state
Law. The
Company has not received an analogous notice or request from any non
U.S.
Governmental Entity.
(f)
Except in the ordinary course of the Company's business and
except as
disclosed in the Environmental Reports referenced on Schedule
3.19,
Hazardous Materials have not been transported to, or disposed of,
emitted,
discharged or otherwise Released or threatened to be Released on or at,
any
real property presently or formerly owned, leased or operated by the
Company or
to or from any other location at any time, or to the Knowledge of the
Company,
which may (i) give rise to liability of the Company under any
applicable
Environmental Law, or (ii) interfere in any material respect with the
Company's
continued operations, or (iii) impair in any material respect the fair
saleable
value of the portion of any real property currently leased by the
Company.
(g)
The Company has not assumed or retained, by contract or
operation of law
in connection with the sale or transfer of any assets or business,
liabilities
arising from or associated with or otherwise in connection with such
assets or
business of any kind fixed or contingent, under any applicable
Environmental
Law.
(h)
Schedule 3.19 lists all written
environmental reports, audits,
investigations or assessments which have been conducted in respect of
the
Leased Premises or any former facility, either by the Company or any
attorney, environmental
consultant or engineer engaged by Company for that purpose and which
are in the
possession of the Company, true, correct and complete copies of which
have been
provided to Parent.
(i)
To the Company's Knowledge, there are no aboveground oil
tanks or
underground oil storage tanks on or under the Leased Premises, and any
aboveground or underground oil tanks previously situated on the Leased
Premises
or any other property currently or formerly (after December 31, 2005)
owned, operated
or leased by the Company have been removed in accordance with all
Environmental
Laws and no residual contamination, if any, remains at such sites in
excess of
applicable standards.
3.20
Tax Matters.
(a)
The Company has duly and timely filed all Tax Returns
required to have
been filed by or with respect to the Company. Each such Tax
Return
correctly and completely reflects all liability for Taxes and all other
information required to be reported thereon. All Taxes owed
by the
Company (whether or not shown on any Tax Return) have been timely paid.
The
Company has adequately provided for, in its books of account and
related
records, all liability for all unpaid Taxes, being current Taxes not
yet due
and payable.
(b)
The Company has withheld and timely paid all Taxes required
to have been
withheld and paid by it and has complied with all Tax-related
information
reporting and backup withholding requirements, including maintenance of
required records with respect thereto.
(c)
The Company is not the beneficiary of any extension of time
within which
to file any Tax Return, nor has the Company made (or had made on its
behalf)
any requests for such extensions. The Company has not waived (or is
subject to
a waiver of) any statute of limitations in respect of Taxes or has
agreed to
(or is subject to) any extension of time with respect to a Tax
assessment or
deficiency.
(d)
Schedule 3.20 indicates those Tax Returns
that, since January 1,
2000, have been audited and those Tax Returns that currently are the
subject of
audit. Except as set forth in Schedule 3.20
there is no Action now
pending or threatened against or with respect to the Company in respect
of any
Tax or any assessment or deficiency. There are no liens for
Taxes (other
than current Taxes not yet due and payable) upon the assets of the
Company. The
Company has delivered to Parent correct and complete copies of all
federal
income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by the Company since December 31, 2005.
(e)
Schedule 3.20 lists, as of the Closing
Date, all jurisdictions in
which the Company currently files Tax Returns. No claim has been made
in writing
to the Company by an authority in a jurisdiction where the Company does
not
file Tax Returns that the Company is or may be subject to taxation by
that
jurisdiction or that the Company must file Tax Returns.
(f)
The Company has not filed a consent pursuant to the
collapsible
corporation provisions of Section 341(f) of the Code (or any
corresponding
provisions of state, local or foreign income Tax Law). None
of the assets
or properties of the Company constitutes tax-exempt bond financed
property or
tax-exempt use property within the meaning of Section 168 of the
Code.
The Company is not a party to any "safe harbor lease" within the
meaning of Section 168(f)(8) of the Code, as in effect prior to
amendment by
the Tax Equity and Fiscal Responsibility Act of 1982, or to any
"long-term
contract" within the meaning of Section 460 of the Code. The
Company
has not ever been a United States real property holding corporation
within the meaning of Section 897(c) (2) of the Code. The Company is
not a
"foreign person" within the meaning of Section 1445 of the
Code. The Company has not made any payments, is obligated to
make any
payments, or is a party to any agreement that would obligate it to make
payments that would result in a nondeductible expense under Section
280G of the
Code or an excise tax to the recipient of such payments pursuant to
Section
4999 of the Code.
(g)
To the extent the Company does not report contracts under the
method
specified in Section 460 of the Code: (A) all contracts which are
eligible for
such reporting have been reported in accordance with such method and
only
contracts which are eligible for such method have been reported in
accordance
with such method, (B) all amounts of income or loss with respect to
such
contracts have been properly computed, and (C) all amounts of interest
due on
any completed contracts have been paid and for those contracts not yet
completed, adequate reserves have been established for any future
interest
payments.
(h)
The Company has not agreed to nor is required to make by
reason of a
change in accounting method or otherwise, any adjustment under Section
481(a)
of the Code. The Company has not been the "distributing corporation"
(within the meaning of Section 355(c)(2) of the Code) with respect to a
transaction described in Section 355 of the Code within the 5-year
period
ending as of the date of this Agreement. The Company has not received
(or is
subject to) any ruling from any Taxing Authority or has entered into
(or is
subject to) any agreement with a Taxing Authority. The Company has
disclosed on
its federal income Tax Returns all positions taken therein that would
give rise
to a substantial understatement of federal income Tax within the
meaning of
Section 6662 of the Code.
(i)
The Company (i) has not ever been a party to any Tax
allocation or
sharing agreement or Tax indemnification agreement, (ii) has not ever
been a
member of an affiliated, consolidated, condensed or unitary group, or
(iii)
does not have any liability for or obligation to pay Taxes of any other
Person
under Treas. Reg. 1.1502-6 (or any similar provision of Tax Law), or as
transferee or successor, by contract or otherwise. The
Company is not a
party to any joint venture, partnership, or other arrangement that is
treated
as a partnership for federal income tax purposes.
(j)
Based solely on activities that occurred prior to the
Closing, the
Company will not be required to include any item of income in, or
exclude any
item of deduction from, taxable income for any taxable period (or
portion
thereof) ending after the Effective Time as a result of any: (i)
intercompany
transactions or excess loss accounts described in Treasury regulations
under
Section 1502 of the Code (or any similar provision of state, local, or
foreign
Tax Law), (ii) installment sale or open transaction disposition made on
or
prior to the Effective Time or (iii) prepaid amount received on or
prior to the
Effective Time.
(k)
The Company has not entered into any transaction that
constitutes a
"reportable transaction" within the meaning of Treasury Regulation
Section 1.6011-4(b).
(l)
Schedule 3.20 lists each person who
Company reasonably believes
is, with respect to Company or any Affiliate of the Company, a
"disqualified individual" (within the meaning of Section 280G of the
Code and the Regulations thereunder).
(m)
Since the Balance Sheet Date the Company has not incurred any
liability
for Taxes arising from extraordinary gains or losses, as that term is
used in
GAAP, outside the ordinary course of business consistent with past
custom and
practice.
(n)
At all times since May 15, 1988, for federal income tax
purposes, the
Company has validly been treated as an "S corporation" within the
meaning of Section 1361(a) of the Code and has validly been treated in
a
similar manner for purposes of the income tax laws of all states in
which it
has been subject to taxation. The Company has not had any
"net
unrealized built-in gain" within the meaning of Section 1374(d) of the
Code that would give rise to taxation pursuant to Section 1374 of the
Code (or
comparable provisions of state law) if all of the assets of the Company
were
disposed of as of the end of the day immediately preceding the Closing
Date at
their respective fair market values.
(o)
The Company (i) has not ever been a member of an affiliated
group of
corporations within the meaning of Section 1504 of the Code, and with
respect
to foreign, state or local income or franchise Taxes, any consolidated,
combined, unitary or similar group, other than the group that has the
Company
as its common Parent and (ii) has no liability for the Taxes of any
person as
defined in Section 7701(a)(1) of the Code, under Treas. Reg SS1.1502-6
(or any
similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise.
(p)
The Company's tax basis in its assets for purposes of
determining its
future amortization, depreciation and other federal income tax
deductions is
accurately reflected on the Company's tax books and records.
3.21
Licenses, Permits
and Authorizations.
(a)
Schedule 3.21 contains a complete and
accurate list of all
material licenses, approvals, consents, franchises, authorizations,
security
clearances and other permits of, or with, any Governmental Entity,
whether
foreign, federal, state or local, which are held by the Company ("Governmental
Permits"). All Governmental Permits listed or
required to be
listed on Schedule 3.21 are valid and in full force
and effect and there
are no proceedings pending or, to the Knowledge of the Company,
threatened that
seek the revocation, cancellation, suspension or adverse modification
thereof. Such Governmental Permits constitute all of the
material
licenses, franchises and other permits necessary to permit the Company
to own,
operate, use and maintain its assets in the manner in which it is now
operated
and maintained and to conduct its business as currently
conducted. No
notice is required to be given to any Governmental Entity or otherwise
under
any of the Governmental Permits to consummate the transactions
contemplated
herein.
(b)
Except as set forth on Schedule 3.21:
(i)
the Company is, and at all times since December 31, 2006 has
been, in
material compliance with all of the terms and requirements of each
Governmental
Permit identified or required on Schedule 3.21;
(ii) To
the Knowledge of the Company, no event has occurred or circumstance
exists that
may (with or without notice or lapse of time) (A) constitute or result
directly
or indirectly in a violation of, or a failure to comply with, any term
or
requirement of any Governmental Permit listed or required to be listed
on Schedule
3.21 or (B) result directly or indirectly in the revocation,
withdrawal,
suspension, cancellation, or, termination of, or any modification to,
any
Governmental Permit listed or required to be listed on Schedule
3.21;
(iii) the
Company has not received, at any time during the past five (5) years,
any
written notice or other written communication from any Governmental
Entity or
any other Person regarding (A) any actual, alleged, possible, or
potential
violation of or failure to comply with any term or requirement of any
Governmental Permit, or (B) any actual, proposed, possible, or
potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Permit; and
(iv) all
applications required to have been filed for the renewal of any
Governmental
Permits have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have been made
with
respect to such Governmental Permit have been duly made on a timely
basis with
the appropriate Governmental Bodies.
3.22
Insurance.
(a)
Schedule 3.22 contains a summary of all
insurance coverage for
all, as applicable, policies of asset, fire, hazard, casualty,
liability, life,
directors and officers liability, worker's compensation, business
interruption,
product liability and other forms of insurance of any kind owned or
held by the
Company. The Company has heretofore delivered or provided to
Parent true,
correct and complete copies of all such policies. All such
policies: (i)
are in full force and effect and no notice of cancellation or
termination has
been received thereunder; (ii) insure all material assets of the
Company; and
(iii) have the policy expiration dates set forth in Schedule
3.22.
Schedule 3.22 also lists all insurance claims
arising or existing during
the past three (3) years.
(b)
Except as set forth on Schedule 3.22, to
its Knowledge, the
Company has not been refused any insurance, nor has such coverage been
limited
by any insurance carrier to which it has applied for any such insurance
or with
which it has carried insurance, nor has such coverage been limited,
disclaimed
or discharged with respect to any claim made under any policy in force
for the
benefit of the Company. The Company is not in any respect in
breach of or
default under any such policy (including any breach or default with
respect to
the payment of premiums or the giving of notice), and no event has
occurred
which, with notice or the lapse of time, would constitute such a breach
or
default or permit termination or modification under such
policy. At the
time of the Closing, all insurance policies currently in effect will be
outstanding and in full force and effect. The Company has no
Knowledge of
any material premium increase with respect to any such policy and no
such
policy provides for retroactive premium adjustments.
(c)
Except as set forth in Schedule 3.22,
there is no material claim
by the Company under any insurance policy listed in Schedule
3.22.
Except as set forth on Schedule 3.22, the Company
has not had any
casualty loss or occurrence which may give rise to any claim of any
kind not
covered by insurance and the Company is not aware of any occurrence
which may
give rise to any claim not covered by insurance.
(d)
Schedule 3.22 describes any self-insurance
arrangement by or
affecting the Company, including any reserves thereunder, and describes
the
loss experience for all claims that were self-insured in the current
year and
the preceding three years.
(e)
All insurance policies listed or required to be listed on Schedule
3.22 are issued by an insurer that, to the Company's
Knowledge, is
financially sound and reputable. Such policies are in full
force and
effect and are enforceable in accordance with their terms and will
continue in
full force and effect with respect to the Company immediately after the
Effective Time. To the Company's Knowledge, such policies
provide
adequate insurance coverage for the Company and its businesses,
properties,
assets and employees and are sufficient in all material respects for
compliance
with all Laws to which the Company is a party or by which it is
bound.
Such policies are sufficient in all material respects for compliance
with all
Contracts to which the Company is a party or by which it is bound.
3.23
Affiliated
Transactions. Except for payments under an
individual's compensation
arrangements with the Company disclosed on Schedule 3.17,
none of the
directors, officers, employees or stockholders of the Company, or
Affiliates of
any of them, is a party to any agreement, understanding, indebtedness
or
proposed transaction with the Company or is directly or indirectly
interested
in any contract or agreement (whether oral or written) with the
Company.
The Company has not guaranteed or assumed any obligations of any of its
directors, officers, employees or stockholders, or of Affiliates of any
of
them. Neither the Company nor any director, officer or
stockholder or, to
the Company's Knowledge, any employee of the Company: (a) has any
direct or indirect
financial interest in any competitor, supplier or customer of the
Company or
(b) owns, directly or indirectly, in whole or in part, or has any other
interest in, any tangible or intangible property or other assets which
the
Company uses or has used in the conduct of the Business or otherwise.
3.24
Customers;
Vendors.
(a)
Except for attrition in the ordinary course of business,
since January 1,
2008, no material customer has cancelled or otherwise terminated, or
threatened
in writing to cancel or terminate its relationship with the
Company. The
Company has not received any notice, and the Company does not have
Knowledge,
that any such customer intends or desires to cancel or otherwise modify
its
relationship with the Company (including the level or frequency of
business
that it does with the Company). To the Knowledge of the
Company, no
change in the status of the Company as a "disadvantaged business
enterprise," a "female owned business" or any similar status
that relates to the status of the Stockholders (or of Xxxxxx) as the
stockholders and/or principals of the Company will adversely affect the
Company's relationship with, or the level of business that the Company
does
with, any customer.
(b)
Except for changes in the ordinary course of business, since
January 1,
2008, no material vendor of, or supplier to, the Company has cancelled
or
otherwise terminated, or threatened in writing to cancel or terminate,
its
relationship with the Company. The Company has not received
any notice,
and the Company does not have Knowledge, that any such vendor or
supplier
intends or desires to cancel or otherwise modify its relationship with
the
Company (including the level or frequency of business that it does with
the
Company).
3.25
Books and Records.
The minute books (containing the records of the meetings, or written
consents
in lieu of such meetings, of the stockholders, the board of directors
and any
committees of the board of directors), the stock certificate books, and
the
stock record books of the Company are correct and complete in all
material
respects, and have been maintained in accordance with sound business
practices
for similarly situated closely held businesses. At the
Closing, all known
books and records of the Company in the possession or control of the
Company
will be made available to Surviving Corporation.
3.26
Brokers' Fees.
No broker, finder, investment banker or other Person is entitled to any
brokerage fee, finders' fee or other commission in connection with the
transactions contemplated by this Agreement based upon arrangements
made by the
Company, any Stockholder, Xxxxxx
or any Affiliate of any of them.
3.27
Product Warranty.
(a)
There are no warranties (express or implied) outstanding with
respect to
any products currently or formerly manufactured, sold, distributed,
provided,
shipped or licensed ("Products"), or any services
rendered, by
the Company, beyond that set forth in the Company's standard conditions
of sale
or service, a copy of which is set forth in Schedule 3.27.
(b)
Each Product manufactured, sold, distributed, provided,
shipped or
licensed, or service rendered, by the Company has been in conformity
with all
applicable contractual commitments and warranties of Company. There are
no
material design, manufacturing or other defects, latent or otherwise,
with
respect to any Products and such Products are not toxic or dangerous
when used
in accordance with their intended use. To the Company's
knowledge, each
Product that has been manufactured, sold, distributed, provided,
shipped or
licensed prior to Closing contains all warnings required by applicable
Law and
such warnings are in accordance with reasonable industry practice.
3.28
Bank Accounts.
Schedule 3.28 sets forth the name of each bank, safe
deposit company or
other financial institution in which the Company has an account, lock
box or
safe deposit box and the names of all persons authorized to draw
thereon or have
access thereto.
3.29
Securities Law.
(a)
Each Stockholder understands that the Parent Shares are
"restricted
securities" and have not been registered under the Securities Act or
any
applicable state securities law and is acquiring the Parent Shares as
principal
for its own account and not with a view to, or for distributing or
reselling
such Parent Shares or any part thereof in violation of the Securities
Act or
any applicable state securities laws. Each Stockholder
acknowledges that
Parent is under no obligation to, and has no intention to, register the
Parent
Shares or comply with any exemption from registration so as to permit
any
resale and that Parent has not represented that at some future date any
attempt
will be made to register the Parent Shares or to comply with an
exemption from
registration so as to permit any resale.
(b)
Each Stockholder does not presently have any agreement, plan
or
understanding, directly or indirectly, with any Person to distribute or
effect
any distribution of any of the Parent Shares (or any securities which
are
derivatives thereof) to or through any person or entity, and each
Stockholder
is not a registered broker-dealer under Section 15 of the Exchange Act
or an
entity engaged in a business that would require it to be so registered
as a
broker-dealer. Each Stockholder shall not attempt to sell,
transfer,
assign, pledge or otherwise dispose of all or any portion of the Parent
Shares
in the absence of either an effective registration statement with
respect to
such Parent Shares or an opinion of reputable securities counsel
satisfactory
in form and substance to Parent and its counsel that such proposed
sale,
transfer, assignment, pledge or other disposition would not be in
violation of
the Securities Act.
(c)
Each Stockholder acknowledges that each certificate
evidencing the Parent
Shares may bear a legend to the effect that said Parent Shares have not
been
registered under the Securities Act and were issued in a transaction
not
involving a public offering in reliance on an investment representation.
(d)
Each Stockholder, by reason of their business or financial
expertise or
the business or financial expertise of their professional advisers who
are
unaffiliated with and who are not compensated by Parent or any
affiliate or
selling agent of Parent, directly or indirectly, have the capacity to
protect
their own interests in connection with the transactions contemplated
hereby. Each Stockholder is aware that there may be legal and
practical
limits on its ability to sell or dispose of the Parent Shares and
represents
and warrants that it has taken full cognizance of and understands all
of the
risk factors related to acquiring the Parent Shares and that it is able
to bear
the economic risks attendant to holding the Parent Shares.
(e)
Each Stockholder acknowledges that it has had the opportunity
to review
Parent SEC Reports and has been afforded (i) the opportunity to ask
such questions
as it has deemed necessary of, and to receive answers from,
representatives of
the Company concerning the terms and conditions of the offering of the
Parent
Shares and the merits and risks of acquiring the Parent Shares; (ii)
access to
information about Parent and its financial condition, results of
operations,
business, properties, management and prospects sufficient to enable it
to
evaluate its investment; and (iii) the opportunity to obtain such
additional
information that Parent possesses or can acquire without unreasonable
effort or
expense that is necessary to make an informed investment decision with
respect
to the investment. Each Stockholder has sought such
accounting, legal and
tax advice as it has considered necessary to make an informed decision
with
respect to its acquisition of the Parent Shares and is so relying on
such
advice. Each Stockholder acknowledges that the only reports
and
information upon which such Stockholder has relied in agreeing to
acquire the
Parent Shares are Parent SEC Reports and the Transaction Documents.
Each
Stockholder has independently evaluated the merits of its decision to
acquire
Parent Shares pursuant to this Agreement. Each Stockholder
understands
that nothing in this Agreement or any other materials presented by or
on behalf
of Parent to any Stockholder in connection with this Agreement
constitutes
legal, tax or investment advice.
(f)
Each Stockholder understands that the Parent Shares are being
offered and
sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and
that Parent
is relying in part upon the truth and accuracy of, and such
Stockholder's
compliance with, the representations, warranties, agreements,
acknowledgements
and understandings of such Stockholder set forth herein in order to
determine
the availability of such exemptions and the eligibility of such
Stockholder to
acquire the Parent Shares. Such Stockholder understands that
no United States
federal or state agency or any other government or governmental agency
has
passed on or made any recommendation or endorsement of the Parent
Shares or the
fairness or suitability of the investment in the Parent Shares nor have
such
authorities passed upon or endorsed the merits of the offering of the
Parent
Shares.
3.30
Disclosure.
No representation or warranty by the Company, the Stockholders or
Xxxxxx in
this Agreement, and no statement made by the Company, the Stockholders
or
Xxxxxx in the Exhibits or Schedules hereto or any certificate furnished
or to
be furnished to Parent pursuant hereto, or in connection with the
negotiation,
execution or performance of this Agreement, contains or will at the
Closing
contain any untrue statement of a material fact or omits or will omit
to state
any material fact necessary to make any statement herein or therein, in
light
of the circumstances under which they were made, not misleading. Except
as
specifically set forth in this Agreement or in the Exhibits or
Schedules
hereto, there are no facts or circumstances of which the Company is
aware that
could reasonably be expected to have, individually or in the aggregate,
a
Material Adverse Effect.
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent
and Merger Sub jointly
and severally represent and warrant to the Stockholders and Xxxxxx as
follows:
4.1
Organization and
Qualification. Each of Parent and Merger Sub is a
corporation duly
organized, validly existing and in good standing under the laws of the
State of
Delaware and has full power and authority to conduct its business as it
has
been and is presently being conducted and to own, operate or lease, as
applicable, its properties and assets now owned, operated or leased by
it.
4.2
Due Authorization.
Each of Parent and Merger Sub has full requisite power and authority to
execute
and deliver this Agreement and to perform all obligations to be
performed by
it, respectively, hereunder. The execution and delivery of
this Agreement
and the consummation of the transactions contemplated hereby and
thereby have
been duly and validly authorized and approved by each of Parent and
Merger Sub
and no other proceeding on its respective part is necessary to
authorize this
Agreement and the consummation of the transactions contemplated
hereby.
This Agreement has been duly and validly executed and delivered by each
of
Parent and Merger Sub and constitutes the legally valid and binding
obligation
of each of them, enforceable against it, respectively, in accordance
with its
terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance,
reorganization, moratorium and similar Laws affecting creditors' rights
generally and subject, as to enforceability, to general principles of
equity.
4.3
No Conflict.
The execution, delivery and performance of this Agreement by each of
Parent and
Merger Sub and the consummation of the transactions contemplated hereby
do not,
and will not, directly or indirectly:
(a)
violate, conflict with, or result in the breach of its
respective
organizational documents;
(b)
violate, conflict with, or result in a violation of, or give
any
Governmental Entity or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy
or obtain
any relief under, any Law or any Court Order to which it, or any of the
assets
owned or used by it may be subject; or
(c)
violate, conflict with, or result in a violation of any of
the terms or
requirements of, or give any Governmental Entity the right to revoke,
withdraw,
suspend, cancel, terminate, or modify, any Governmental Permit that is
held by
it or that otherwise relates to the business of, or any of the assets
owned or
used by it.
4.4
Government
Authorities; Consents. No notice to, consent,
approval or
authorization of, or designation, declaration or filing with, any
Governmental
Entity or other Person is required on the part of either Parent or
Merger Sub
or any of their respective Affiliates with respect to the execution or
delivery
of this Agreement or the consummation of the transactions contemplated
hereby. Each such notice, consent, approval or authorization
of, or
designation, declaration or filing has been provided, obtained or made
(as
applicable) or will be provided, obtained or made prior to the Closing
Date.
4.5
Litigation and
Proceedings. There are no lawsuits, Actions, suits,
claims,
investigations or other proceedings pending or, to the Knowledge of
Parent,
threatened against Parent or Merger Sub which would be reasonably
expected to
delay in any respect consummation of the transactions contemplated
hereby. There is no Court Order or any open injunction
binding upon
Parent or Merger Sub that would be reasonably expected to delay in any
respect
consummation of the transactions contemplated hereby. There
is no
pending, or to the Knowledge of Parent, threatened Action or proceeding
applicable to Parent or Merger Sub by or before any Governmental Entity
seeking
to restrain or invalidate all or any portion of the transactions
contemplated
hereunder.
4.6
Parent Shares.
The Parent Shares have been duly authorized and, when issued to the
Stockholders at Closing in accordance with this Agreement, will be
validly
issued, fully paid and nonassessable.
4.7
SEC Filings;
Financial Statements.
(a)
Parent has made available to the Stockholders all forms,
reports and
documents required to be filed by Parent with the Securities and
Exchange
Commission (the "SEC") since January 1, 2005
(collectively,
the "Parent SEC Reports"), all of which were
filed.
Parent SEC Reports (i) at the time they were filed complied as to form
in all
material respects with the applicable requirements of the Securities
Act of
1933, as amended (the "Securities Act") or the
Securities
Exchange Act of 1934, as amended (the "Exchange Act"),
as the
case may be, and (ii) did not at the time they were filed (or if
amended or
superseded by a filing prior to the date of this Agreement, then on the
date of
such filing) contain any untrue statement of a material fact or omit to
state a
material fact required to be stated therein or necessary in order to
make the
statements therein, in light of the circumstances under which they were
made,
not misleading.
(b)
The consolidated financial statements (including, in each
case, any
related notes) contained in Parent SEC Reports complied as to form in
all
material respects with the applicable rules and regulations of the SEC
with
respect thereto, were prepared in accordance with GAAP applied on a
consistent
basis throughout the periods involved (except as may be indicated in
the notes
to such financial statements or, in the case of unaudited statements,
as
permitted by the SEC) and fairly presented the consolidated financial
position
of Parent and its subsidiaries as at the respective dates and the
consolidated
results of its operations and cash flows for the periods indicated
(subject, in
the case of the unaudited financial statements, to normal year end
recurring
adjustments).
4.8
Due Diligence by
Parent and Merger Sub. Parent and Merger Sub each
acknowledge that
each has had the opportunity to conduct due diligence with respect to
the
Company and has been afforded (i) the opportunity to ask such questions
as it
has deemed necessary of, and to receive answers from, representatives
of the
Company concerning any matter; (ii) access to information about the
Company and
its financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate the
Merger; and
(iii) the opportunity to obtain such additional information that the
Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed decision with respect to the
Merger. Each
of Parent and Merger Sub has sought such accounting, legal and tax
advice as it
has considered necessary to make an informed decision with respect to
the Merger.
Notwithstanding anything to the contrary in this Agreement, neither
this Section
4.8 nor any other provision of this Agreement shall diminish
or limit the
extent to which Parent and Merger Sub may rely upon the
representations,
warranties and covenants of the Company, the Stockholders and Xxxxxx in
this Agreement and the other
Transaction Documents.
ARTICLE
V
CONDITIONS TO CLOSING
5.1
Conditions Precedent to Obligations of Parent and
Merger Sub.
The obligation of Parent and Merger Sub to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or
before the
Closing, of each of the following conditions, any of which may be
waived by
Parent in writing, and the Company, each Stockholder and Xxxxxx shall
each use
their respective best efforts to cause such conditions to be fulfilled:
(a)
Representations and Warranties.
Each of the representations
and warranties of the Company, the Stockholders and Xxxxxx in this
Agreement
shall be true and correct in all respects (in the case of any
representation or
warranty containing any materiality qualification) or in all material
respects
(in the case of any representation or warranty without any materiality
qualification) on and as of the Closing Date with the same force and
effect as
though made on and as of the Closing Date, except to the extent that
any of
such representations and warranties refers specifically to a date other
than
the Closing Date, in which case such representations and warranties
shall be
true and correct on and as of such date.
(b)
Performance of the Company, the Stockholders and
Xxxxxx. Each of the Company, the
Stockholders and Xxxxxx
shall have performed and complied in all material respects with all
agreements,
covenants and conditions required by this Agreement to be performed or
complied
with by them at or before the Closing.
(c)
Closing Deliveries. All of the
deliveries to be made by the
Company, the Stockholders and Xxxxxx
pursuant to Section 2.5(a) hereto shall have been
made.
(d)
Certificate. Parent shall have
received a certificate
executed by an officer of the Company and by Xxxxxx dated the Closing
Date,
certifying as to the fulfillment of the conditions set forth in Sections
5.1(a) and (b).
(e)
Secretary's Certificate. Parent
shall have received a
certificate of the Secretary of the Company, dated as of the Closing
Date,
certifying: (i) the resolutions adopted by the Board of Directors of
the Company
approving the transactions contemplated by this Agreement and the other
transaction documents; (ii) the current versions of the Articles of
Incorporation and Bylaws of the Company; and (iii) as to the signatures
and
authority of all individuals executing this Agreement or any other
Transaction
Documents on behalf of the Company.
(f)
Litigation. No Action or
proceeding shall be pending or
threatened before any Governmental Entity, and no claim or demand shall
have
been made against Parent, the Company, any Stockholder or Xxxxxx,
seeking to restrain or prohibit the
Closing.
(g)
No Material Adverse Change.
There shall have been no
Material Adverse Change from the business described on the Financial
Statements.
(h)
Real Estate Lease. Parent shall
have received from the
landlord under the Real Estate Lease a consent and non-disturbance
agreement in
form and substance satisfactory to Parent in its sole and absolute
discretion.
(i)
Payoff Letters; Release of Encumbrances.
Parent shall have
received payoff letters from San Diego National Bank (the "Bank")
and from Xxxxx X. Xxxxxx, as Trustee of the Xxxxxxx Xxxxxx Trust dated
March
17, 2003 (the "Lender Trust"), with respect to the
balances
due from the Company to each of them as of the Closing Date (such
amounts,
respectively, the "Bank Payoff Amount" and the "Lender
Trust Payoff Amount").
(j)
Consents. The Company shall have
obtained all material
consents, approvals or waivers from, and provided any required notices
to, any
Governmental Bodies and other Persons necessary for the execution,
delivery and
performance of this Agreement and the transactions contemplated thereby
and
indicated on Schedule 3.6.
(k)
Legal Opinion. The Company shall
have delivered to Parent a
legal opinion from Xxxxxx & Xxxxxxx, A Professional
Corporation, counsel to
the Company, addressed to Parent, dated as of the Closing Date, in the
form
attached hereto as Exhibit C.
(l)
Escrow Agreement. The Escrow
Agreement shall have been duly
executed by the Stockholders, Xxxxxx
and Escrow Agent.
(m)
Xxxxxx'x
Resignation. Xxxxxx
shall have duly resigned from the Board of Directors of the Company, as
an
officer of the Company and from any position as trustee of any Company
Benefit
Plan.
(n)
Additional Documents. Parent
shall have received such other
documents, instruments and certificates as it shall have reasonably
requested
for the purpose of effecting the transactions provided for and
contemplated by
this Agreement.
5.2
Conditions
Precedent to Obligations of the Company, Stockholders and Xxxxxx.
The obligations of the
Company, the Stockholders and Xxxxxx to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or
before the
Closing, of each of the following conditions, any of which may be
waived by
Xxxxxx in writing, and Parent shall use its best efforts to cause such
conditions to be fulfilled:
(a)
Representations and Warranties.
The representations and
warranties of Parent and Merger Sub in this Agreement shall be true and
correct
in all respects (in the case of any representation or warranty
containing any
materiality qualification) or in all material respects (in the case of
any
representation or warranty without any materiality qualification) on
and as of
the Closing Date with the same force and effect as though the same had
been
made on and as of the Closing Date, except to the extent that any of
such
representations and warranties refers specifically to a date other than
the
Closing Date, in which case such representations and warranties shall
be true
and correct shall be true and correct on and as of such date.
(b)
Performance by Parent. Parent
shall have performed and
complied in all material respects with the agreements, covenants and
conditions
required by this Agreement to be performed or complied with by it at or
before
the Closing.
(c)
Closing Deliveries. All of the
deliveries to be made by
Parent at the Closing pursuant to Section 2.5(b)
hereto shall have been
made.
(d)
Certificate. The Company shall
have received a certificate
executed by officers of each of Parent and Merger Sub dated as of the
Closing
Date, certifying as to the fulfillment of the conditions set forth in Sections
5.2(a) and (b).
(e)
Secretary's Certificate of Parent.
Xxxxxx shall have
received a certificate of the Secretary of Parent, dated as of the
Closing
Date, certifying: (i) the resolutions adopted by the Board of Directors
of
Parent approving the transactions contemplated by this Agreement and
the other
transaction documents; (ii) the current versions of the Certificate of
Incorporation and Bylaws of Parent; and (iii) as to the signatures and
authority of all individuals executing this Agreement or any other
Transaction
Documents on behalf of Parent.
(f)
Secretary's Certificate of Merger Sub.
Xxxxxx shall have
received a certificate of the Secretary of Merger Sub, dated as of the
Closing
Date, certifying: (i) the resolutions adopted by the Board of Directors
of
Merger Sub approving the transactions contemplated by this Agreement
and the other
transaction documents; (ii) the current versions of the Certificate of
Incorporation and Bylaws of Merger Sub; and (iii) as to the signatures
and
authority of all individuals executing this Agreement or any other
Transaction
Documents on behalf of Merger Sub.
(g)
Legal Opinion. Parent shall have
obtained and delivered to
the Stockholders a legal opinion from Xxxx Xxxxx LLP, counsel to
Parent,
addressed to the Stockholders and Xxxxxx,
dated as of the Closing Date, in the form attached hereto as Exhibit
D.
(h)
Escrow Agreement. The Escrow
Agreement shall have been duly
executed by Parent and Escrow Agent.
(i)
Litigation. No Action or
proceeding shall be pending or
threatened before any Governmental Entity, and no claim or demand shall
have
been made against Parent or the Company, seeking to restrain or
prohibit the
Closing.
ARTICLE
VI
POST-CLOSING COVENANTS.
6.1
Covenants of Xxxxxx
and the Stockholders.
(a)
Transfer Taxes. All transfer,
documentary, sales, use,
stamp, registration and other such Taxes and fees (including any
penalties and
interest thereon) incurred by Xxxxxx, Stockholders or Company in
connection
with this Agreement shall be paid by them when due, and each shall, at
their
own respective expense, file all necessary Tax Returns and other
documentation
with respect to all such transfer, documentary, sales, use, stamp,
registration
and other Taxes and fees, and if required by applicable law, Parent
shall, and
shall cause its affiliates to, join in the execution of any such Tax
Returns
and other documentation.
(b)
Confidentiality. Each
Stockholder and Xxxxxx shall treat and
hold as confidential any information concerning the business and
affairs of the
Company that is not already generally available to the public (the "Confidential
Information"), refrain from using any of the Confidential
Information
except in connection with this Agreement, and deliver promptly to
Parent, at
the request and option of Parent, all tangible embodiments (and all
copies) of
the Confidential Information which are in their possession or under
their
control. In the event that any Stockholder or Xxxxxx is
requested or
required (by oral question or request for information or documents in
any legal
proceeding, interrogatory, subpoena, civil investigative demand, or
similar
process) to disclose any Confidential Information, such Stockholder or
Xxxxxx
shall notify Parent promptly of the request or requirement so that
Parent may
seek an appropriate protective order or waive compliance with the
provisions of
this Section 6.1(b). If, in the absence
of a protective order or
the receipt of a waiver hereunder, any Stockholder or Xxxxxx is, on the
advice
of counsel, compelled to disclose any Confidential Information to any
tribunal
or else stand liable for contempt, such Stockholder or Xxxxxx may
disclose the
Confidential Information to the tribunal; provided that such disclosing
Person
shall use her or its best efforts to obtain, at the request of Parent,
an order
or other assurance that confidential treatment shall be accorded to
such
portion of the Confidential Information required to be disclosed as
Parent
shall designate. Each Stockholder and Xxxxxx
acknowledges and agrees that in the event of a breach by any of them of
any of
the provisions of this Section 6.1(b), monetary
damages shall not
constitute a sufficient remedy. Consequently, in the event of
any such
breach, the Company, Parent and/or their respective successors or
assigns may,
in addition to other rights and remedies existing in their favor, apply
to any
court of law or equity of competent jurisdiction for specific
performance
and/or injunctive or other relief in order to enforce or prevent any
violations
of the provisions of this Section 6.1(b), in each
case without the
requirement of posting a bond or proving actual damages.
(c)
Invention, Copyright and Secrecy Agreements with
Surviving
Corporation's Employees. Xxxxxx shall, within three (3)
business days
following the Closing, cause each employee of the Surviving Corporation
to
execute and deliver to the Surviving Corporation an Invention,
Copyright and
Secrecy Agreement with the Surviving Corporation in form and substance
acceptable to Parent in its sole and absolute discretion.
6.2
Parent's Covenants
and Acknowledgements.
(a)
Parent covenants that it shall file the reports required to
be filed by
it under the Securities Act and the Exchange Act and the rules and
regulations
adopted by the SEC thereunder (or, if Parent is not required to file
such
reports, it will, upon the request of a Stockholder that holds Parent
Shares,
make publicly available other information so long as necessary to
permit sales
of the Parent Shares under Rule 144 under the Securities Act) and it
will take
such further action as may be reasonably requested by a Stockholder
that holds
Parent Shares, all to the extent required from time to time to enable
the
Stockholders who hold Parent Shares to sell the Parent Shares without
registration under the Securities Act within the limitation of the
exemptions
provided by Rule 144 under the Securities Act, as amended, or any
similar rule
or regulation hereafter adopted by the SEC. Upon the request
of a Stockholder
who holds Parent Shares, Parent shall deliver to such Stockholder a
written
statement as to whether it has complied with such
requirements.
Notwithstanding anything to the contrary in this Agreement, Parent's
covenants
under this Section 6.2 shall terminate and be of no
further force or
effect on the earliest date that the Parent Shares may be resold
without
registration under the Securities Act within the limitation of the
exemptions
provided by Rule 144 under the Securities Act, as amended, or any
similar rule
or regulation hereafter adopted by the SEC.
(b)
Parent covenants that it shall pay, or shall cause the
Surviving
Corporation to pay, the Xxxxxx-Xxxxxx Payables within seventy-five (75)
days
following the Effective Time (to the extent that they are accrued on
the
Company's accounting books and records as of the Closing).
6.3
Mutual Covenants
and Acknowledgements.
(a)
Press Releases and Announcements.
At and prior to the
Closing Date, no press releases related to this Agreement and the
transactions
contemplated herein, or other announcements to the employees, referral
sources,
customers, suppliers or vendors of the Company shall be issued without
the
mutual approval of Parent and Xxxxxx, except for any public disclosure
which is
required by law or regulation (in which case the disclosure shall be
prepared
by Parent). After the Closing Date, no press releases related
to this
Agreement and the transactions contemplated herein, or other
announcements to
the employees, customers or suppliers of the Company, shall be issued
by any
party other than Parent without Parent's prior written consent.
(b)
Specific Performance. The
Company, the Stockholders and Xxxxxx each acknowledge that the
Company's business is
unique and recognizes and affirms that in the event of a breach of this
Agreement by the Company, a Stockholder or Xxxxxx, Parent will be
irreparably harmed and
money damages may be inadequate and Parent may have no adequate remedy
at
law. Accordingly, the Company, each Stockholder and Xxxxxx
agree that
Parent shall have the right, in addition to any other rights and
remedies
existing in its favor, to enforce its rights and the Company's, each
Stockholder's and Xxxxxx'x obligations hereunder not only by an Action
for
damages but also by an Action for specific performance, injunctive
and/or other
equitable relief.
6.4
Tax Returns.
(a)
Xxxxxx shall have the exclusive authority and obligation to
cause, at the
Stockholders' sole expense, the accounting firm of LevitzZacks, CPAs
(i) to
prepare, (ii) to execute on behalf of the Company, and (iii) to timely
file, or
cause to be prepared and timely filed, all Tax Returns of the Company
(including all federal, state and local "Short Period" Tax Returns)
that are due with respect to that portion of the Company's taxable year
ending
on and including the Closing Date; provided, however, that such Tax
Returns
shall be prepared by treating items on such Tax Returns in a manner
consistent
with the past practices with respect to such items and in a manner
consistent
with all applicable regulations of the IRS. Notwithstanding
the
foregoing, without limiting any other provision of this Agreement,
Surviving
Corporation shall cooperate with Xxxxxx, at Xxxxxx'x reasonable
request, in the preparation of all such Tax Returns. The
Company's Short
Period for purposes of this Agreement shall begin on the first day of
the
Company's tax year and end on the Closing Date.
(b)
The Parent shall have the exclusive authority and obligation
(i) to
prepare, (ii) to execute on behalf of the Surviving Corporation, and
(iii) to
timely file, or cause to be prepared and timely filed, all Tax Returns
of the
Surviving Corporation that are due with respect to that portion of the
Surviving Corporation's taxable year beginning after the Closing Date.
6.5
Controversies.
The Parent shall promptly notify Xxxxxx in writing upon receipt by the
Parent
or any Affiliate of the Parent (including the Surviving Corporation
after the
Closing Date) of written notice of any inquiries, claims, assessments,
audits
or similar events with respect to Taxes relating to a taxable period
ending on
and including the Closing Date for which the Stockholders or Xxxxxx may
be
liable under this Agreement (any such inquiry, claim, assessment, audit
or
similar event, a "Tax Matter"). The Parent
shall have
the sole right to control any audit or examination by any taxing
authority,
initiate any claim for refund or amend any Tax Return, and contest,
resolve and
defend against any assessment for additional Taxes, notice of Tax
deficiency or
other adjustment of Taxes of, or relating to, the income, assets or
operations
of the Surviving Corporation or the Company for all taxable periods;
provided
that any such item affecting a period of time before the Closing Date
will
require the consent of Xxxxxx, which consent shall not be unreasonably
withheld
or delayed.
ARTICLE
VII
INDEMNIFICATION
7.1
Survival. The representations,
warranties and covenants in
this Agreement (including all schedules, exhibits and annexes hereto)
shall
survive the Closing. If the Closing occurs, the Stockholders
and Xxxxxx
will have no liability for indemnification with respect to any
representation
or warranty or pursuant to Section 7.2(a)(i) unless
on or before the
Expiration Date for such representation or warranty or such
indemnification
provision, Parent notifies Xxxxxx of a claim specifying the factual
basis of
the claim in reasonable detail to the extent then known by
Parent. The
"Expiration Date" shall mean the date that is
eighteen (18)
months after the Closing Date; provided, however, that (i) the
Expiration Date
shall mean 90 days following the expiration of all relevant statutes of
limitations (including any extensions thereof) for the representations
and
warranties in Section 3.20 (Tax Matters) and Section
3.29
(Securities Law), (ii) the Expiration Date shall mean the third
anniversary of the
Closing Date for the representations and warranties in Section
3.16
(Employee Benefit Plans), and Section 3.19
(Environmental Matters) and Section
3.30 (Disclosure), (iii) the Expiration Date shall mean the
seventh
anniversary of the Closing Date for the representations and warranties
in Section
3.1 (Organization and Qualification), Section 3.2
(Subsidiaries), Section
3.3 (Capitalization) and Section 3.4 (Due
Authorization), and (iv)
the Expiration Date shall mean the later of the seventh anniversary
date of the
Closing or the otherwise applicable Expiration Date specified in this Section
7.1 for any Intentional Breach. The right to
indemnification, payment
of damages or other remedy based on representations, warranties,
covenants and
obligations in this Agreement will not be affected by any investigation
conducted with respect to, or any knowledge acquired (or capable of
being
acquired) at any time, whether before or after the execution and
delivery of
this Agreement or the Closing Date, with respect to the accuracy or
inaccuracy
of or compliance with, any such representation, warranty, covenant or
obligation.
7.2
Indemnification.
(a)
Indemnification by the Stockholders and Xxxxxx.
(i)
Subject to the other provisions of this ARTICLE VII,
from and
after the Closing Date, the Stockholders and Xxxxxx (the "Seller
Indemnifying Persons") shall jointly and severally indemnify,
defend
and hold harmless Parent, the Surviving Corporation and their
respective
stockholders, directors, officers, employees, representatives, agents,
controlling persons and Affiliates, and their respective successors and
assigns
(collectively, "Parent Indemnified Persons"), for,
and will
pay to any Parent Indemnified Person the amount of any and all demands,
losses,
damages, penalties, claims, liabilities, obligations, Actions, causes
of
action, and expenses (including without limitation, reasonable costs of
investigating, preparing or defending any such claim or Action and
reasonable
legal fees and disbursements), whether or not involving a third party
claim
(collectively, "Losses") arising by reason of, or
resulting
from:
A.
any breach of any representation or warranty of the Company,
the
Stockholders or Xxxxxx contained in this Agreement (including all
schedules,
exhibits and annexes hereto), any other Transaction Document, or in any
agreement, certificate or instrument delivered pursuant hereto or
thereto;
B.
the failure of the Company (with respect to any pre-Closing
performance),
any Stockholder or Xxxxxx
to perform any of its respective agreements or covenants contained in
this
Agreement;
C.
any broker's, finder's, financial advisor's or other similar
fees and
commissions payable by the Company, any Stockholder or Xxxxxx in
connection
with the transactions contemplated by this Agreement;
D.
any and all Pre-Closing Environmental Conditions, whether or
not disclosed
in this Agreement or the exhibits and schedules hereto;
E.
all Tax Liabilities of, or attributable to, the Company or
arising as a
result of any breach of the representations and warranties contained in
Section
3.20;
F.
any Losses arising from or relating to the termination of
employment of
any employee of the Company during the two-year period ending
immediately prior
to the Closing, whether resulting from any claim for wrongful
termination or
otherwise;
G.
any Losses arising from or relating to any claim that any
Person other
than the Stockholders or Merger Sub holds or is entitled to hold or
acquire
(whether from the Company or from any other Person), or entitled to
cause the
Company to issue any share of capital stock or option, warrant,
convertible
security or other right issuable or exercisable for, shares of capital
stock of
the Company; or
H.
any product liability claims resulting from the ownership,
possession or
use of any product manufactured, sold or distributed by the Company
prior to
the Closing, or any claims resulting from any installation or service
performed
by the Company prior to the Closing, or any design-related product
liability
claims resulting from the ownership, possession or use of any product
designed
by the Company prior to Closing.
(ii) To
the extent that a Parent Indemnified Person is entitled to make a claim
for
indemnification pursuant to this Section 7.2(a),
such claim may be
satisfied in the following method, order and priority: (A) first,
subject to
and in accordance with the Escrow Agreement, by the release of a number
of
Escrow Shares from the Escrow Fund released to Parent that have an
aggregate
value (determined in accordance with Section 7.2(a)(iii)
below) equal to
the amount of all such Losses; (B) second, if Xxxxxx or a Stockholder
then
holds Parent Shares outside of the Escrow Fund and Xxxxxx or such
Stockholder
elects to pay the Losses with those shares, by the delivery by Xxxxxx
or such
Stockholder to Parent of Parent Shares that have an aggregate value
(determined
in accordance with Section 7.2(a)(iii) below) equal
to the unpaid
balance of all such Losses; then (C) third, by means of a setoff
against
amounts otherwise payable under the Notes (any such setoff being
applied, in
the aggregate, to both Notes in accordance with the respective
Stockholder
Ownership Percentages of the payees), it being agreed that the exercise
of such
right of setoff by Parent in good faith, whether or not ultimately
determined
to be justified, will not constitute an event of default under the
Notes.
Neither the exercise of nor the failure to exercise such right to cause
Escrow
Shares to be released to Parent from the Escrow Fund, the delivery of
such
Parent Shares by Xxxxxx or a Stockholder to Parent or such right of
setoff will
constitute an election of remedies or limit Parent in any manner in the
enforcement of any other remedies that may be available to it.
(iii) For
all purposes relating to determining the number of Parent Shares
(including
Escrow Shares) to be released or delivered towards the payment of
Losses by
Parent Indemnified Persons, the Parent Shares shall be valued at $2.18
per
share, as adjusted for stock splits, stock dividends and similar events
after
the Closing.
(iv) Notwithstanding
anything to the contrary in this ARTICLE VII:
(A)
the liability of the Stockholders and Xxxxxx for
indemnification under
this ARTICLE VII shall not exceed, as to the
cumulative Losses:
(x) with respect to all Notices of Claims sent during the period ending
on the
third anniversary of the Closing Date, the aggregate sum of One Million
Dollars
($1,000,000); and (y) with respect to all Notices of Claims sent after
the
third anniversary of the Closing Date, the aggregate sum of Five
Hundred
Thousand Dollars ($500,000) less (but not less than zero) any amounts
paid
pursuant to the preceding item (x); and
(B)
Notwithstanding anything to the contrary set forth in this
Agreement,
other than Losses arising out of fraud or willful misconduct of a
Stockholder
or Xxxxxx or Losses arising out of a breach of the representations and
warranties in Sections 3.14(e) and (j) of this Agreement, Stockholders
and
Xxxxxx shall not be required to provide indemnification pursuant to Section
7.2(a)(i)A unless and until the aggregate amount of the
Losses exceeds
$25,000 (the "Basket Threshold"). Once the
aggregate
amount of the indemnification obligation of Stockholders and Xxxxxx
exceeds the Basket Threshold, Stockholders and Xxxxxx shall be required
to provide
indemnification for all Losses, including the $25,000 applied to the
Basket
Threshold.
(b)
Indemnification by Parent.
Subject to the provisions of this
ARTICLE VII, from and after the Closing Date, Parent
shall indemnify,
defend and hold harmless the Stockholders, Xxxxxx and their respective
trustees,
beneficiaries, representatives, agents, controlling
persons, Affiliates,
successors and assigns (collectively, the "Seller Indemnified
Persons")
from and against any and all Losses incurred by the Seller Indemnified
Persons
arising by reason of or resulting from any breach of any warranty,
representation, covenant or agreement of Parent contained in this
Agreement
(including all schedules, exhibits and annexes hereto), any other
Transaction
Document, or in any agreement, certificate or instrument delivered
pursuant
hereto or thereto, or arising from or relating to any of the Assumed
Liabilities, or any broker's, finder's, financial advisor's or other
similar
fees and commissions payable by Parent in connection with the
transactions
contemplated by this Agreement; and Surviving Corporation's ownership
or
operation of the Business after the Closing.
(c)
Interest. Indemnification
payments under this Agreement
shall include interest at the Prime Rate plus 1% from the date the
applicable
Loss is suffered or sustained to the date of payment.
7.3
Indemnification
Procedure for Third Party Claims.
(a)
For the purposes of this ARTICLE VII:
(i)
With respect to indemnification by one or more Seller
Indemnifying
Persons to one or more Parent Indemnified Persons, the term "Indemnitee"
means a Parent Indemnified Persons, the term "Indemnitor"
means the applicable Seller Indemnifying Person, and the term "Indemnitor's
Agent" means Xxxxxx.
(ii) With
respect to indemnification by Parent to one or more Seller Indemnified
Persons,
the term "Indemnitee" means Seller Indemnified
Person, the
term "Indemnitor" means Parent, and the term "Indemnitor's
Agent" means Parent.
(b)
In the event that an Indemnitee receives notice of the
assertion of any
claim or the commencement of any Action by a third party in respect of
which
indemnity may be sought under the provisions of this ARTICLE
VII ("Third
Party Claim"), Indemnitee shall notify the Indemnitor's Agent
in
writing of such Third Party Claim ("Notice of Claim")
and, if
the Indemnitee is a Parent Indemnified Person, concurrently therewith
shall
send a duplicate copy of such Notice of Claim to the Escrow Agent. The
Notice
of Claim shall set forth in reasonable detail: (i) that an Indemnitee
has
incurred Losses or anticipates that it will incur Losses for which such
Indemnitee is entitled to indemnification pursuant to this Agreement;
(ii) the
amount of such Losses, if known, or, if not known, an estimate of the
foreseeable maximum amount of such Losses (which estimate shall not be
conclusive of the final amount of such Losses); and (iii) a description
of the
basis for such Third Party Claim. Failure or delay in notifying the
Indemnitor's Agent will not relieve the Indemnitors of any liability
they may
have to the Indemnitee, so long as the notice is given within prior to
the
applicable Expiration Date, except and only to the extent that such
failure or
delay causes actual harm to the Indemnitors with respect to such Third
Party
Claim.
(c)
Subject to the further provisions of this Section
7.3, the
Indemnitor's Agent will have thirty (30) days (or less if the nature of
the
Third Party Claim reasonably requires) from the date on which the
Indemnitor's
Agent received the Notice of Claim to notify the Indemnitee that the
Indemnitor's Agent will assume the defense or prosecution of such Third
Party
Claim and any litigation resulting therefrom with counsel of its choice
(reasonably satisfactory to the Indemnitee) and at its sole cost and
expense (a
"Third Party Defense"), without prejudice to its
right to
dispute that the Third Party Claim is within the scope of their
indemnity
obligation hereunder. Any Indemnitee shall have the right to employ
separate
counsel in any such Action and to participate in the defense thereof,
but the
fees and expenses of such counsel shall not be at the expense of the
Indemnitors unless (A) the Indemnitor's Agent shall have failed, within
the
time after having been notified by the Indemnitee of the existence of
the
Third Party Claim as provided in the first sentence of this paragraph
(b), to
assume the defense of such Third Party Claim, or (ii) the employment of
such
counsel has been specifically authorized in writing by the Indemnitor's
Agent.
(d)
The Indemnitor's Agent will not be entitled to assume the
Third Party
Defense if:
(i)
a Third Party Claim seeks, in addition to or in lieu of
monetary damages,
any injunctive or other equitable relief (except where non-monetary
relief is
merely incidental to a primary claim or claims for monetary damages);
(ii) the
claim for indemnification relates to or arises in connection with any
criminal
proceeding, action, indictment, allegation or investigation;
(iii) under
applicable standards of professional conduct, a conflict on any
significant
issue exists between the Indemnitee and the Indemnitor's Agent in
respect of
such Third Party Claim;
(iv) upon
petition by the Indemnitee, the appropriate court rules that the
Indemnitor's
Agent failed or is failing to vigorously prosecute or defend such Third
Party
Claim; or
(v)
if the Indemnitee is a Parent Indemnified Person, the amount
of claimed
Losses subject to all outstanding Notices of Claim exceeds the sum of
the value
of the Escrow Shares and other property remaining in the Escrow Fund
and the
remaining amounts payable under the Note.
(e)
If by reason of the Third Party Claim a lien, attachment,
garnishment or
execution is placed upon any of the property or assets of such
Indemnitee, the
Indemnitor's Agent, if it desires to exercise its right to assume such
Third
Party Defense, must furnish a satisfactory indemnity bond to obtain the
prompt
release of such lien, attachment, garnishment or execution.
(f)
If the Indemnitor's Agent assumes a Third Party Defense, it
will take all
steps necessary in the defense, prosecution, or settlement of such
claim or
litigation. The Indemnitor's Agent will not consent to the
entry of any
judgment or enter into any settlement except with the written consent
of the
Indemnitee; provided, however,
the consent of the Indemnitee
shall not be required if all of the following conditions are met: (i)
the terms
of the judgment or proposed settlement include as an unconditional term
thereof
the giving to the Indemnitee by the third party of a release of the
Indemnitee
from all liability in respect of such Third Party Claim; (ii) there is
no
finding or admission of (A) any violation of Law by the Indemnitee (or
any
Affiliate thereof), (B) any violation of the rights of any Person and
(C) no
effect on any other Action or claims of a similar nature that may be
made
against the Indemnitee (or any Affiliate thereof); and (iii) the sole
form of
relief is monetary damages which are paid in full by the Indemnitor's
Agent.
The Indemnitor's Agent shall conduct the defense of the Third Party
Claim
actively and diligently, and the Indemnitee will provide reasonable
cooperation
in the defense of the Third Party Claim. Notwithstanding the foregoing,
the
Indemnitee shall have the right to pay or settle any Third Party Claim,
provided
that in such event, subject to the following
sentence, it shall waive
any right to indemnity therefor by the Indemnitors for such claim
unless the
Indemnitor's Agent shall have consented to such payment or settlement.
If the
Indemnitor's Agent is not reasonably conducting the Third Party Defense
in good
faith, the Indemnitee shall have the right to consent to the entry of
any
judgment or enter into any settlement with respect to the Third Party
Claim
without the prior written consent of the Indemnitor's Agent and the
Indemnitors
shall reimburse the Indemnitee promptly for all Losses incurred in
connection
with such judgment or settlement.
(g)
In the event that (i) an Indemnitee gives Notice of Claim to
the
Indemnitor's Agent and the Indemnitor's Agent fails or elects not to
assume a
Third Party Defense which the Indemnitor's Agent had the right to
assume under
this Section 7.3 or (ii) the Indemnitor's Agent is
not entitled to
assume the Third Party Defense pursuant to this Section 7.3,
the
Indemnitee shall have the right, with counsel of its choice, to defend,
conduct
and control the Third Party Defense. In each case,
the Indemnitee
shall conduct the Third Party Defense actively and diligently, and the
Indemnitors. The Indemnitee shall have the right to consent
to the entry
of any judgment or enter into any settlement with respect to the Third
Party
Claim on such terms as it may deem appropriate; provided,
however, that
the amount of any settlement made or entry of any judgment consented to
by the
Indemnitee without the consent of the Indemnitor's Agent (which consent
shall
not be unreasonably withheld or delayed) shall not be determinative of
the
validity of the claim. If the Indemnitor's Agent does not elect to
assume a
Third Party Defense which it has the right to assume hereunder, the
Indemnitee
shall have no obligation to do so.
7.4
Non-Third Party
Claims. Indemnitee will send a Notice of Claim to
the Indemnitor's
Agent promptly following discovery by any Indemnitee of any matter that
gives
rise to a claim of indemnity pursuant hereto and that does not involve
a Third
Party Claim being asserted against it, together with a detailed
breakdown of
the asserted Losses with appropriate supporting
documentation. If the Indemnitee
is a Parent Indemnified Person, concurrently therewith Indemnitee shall
send a
duplicate copy of such Notice of Claim to the Escrow Agent. Failure or
delay in
notifying the Indemnitor's Agent will not relieve the Indemnitors of
any
liability they may have to the Indemnitee so long as the notice is
given within
prior to the applicable Expiration Date, except and only to the extent
that
such failure or delay causes actual harm to the Indemnitors with
respect to
such claim. The Indemnitor's Agent will reasonably cooperate and assist
the
Indemnitee in determining the validity of the claim for indemnity.
Indemnitor's
Agent will have thirty (30) days from receipt of such a Notice of Claim
to
notify the Indemnitee that it disputes any portion of the claim to
which the
Notice of Claim relates.
7.5
Claims Upon Escrow
Fund or Exercises of Right of Setoff.
Notwithstanding any other
provision of this ARTICLE VII, if Xxxxxx does not
timely give notice to
Parent and, if applicable, the Escrow Agent in accordance with the
terms of the
Escrow Agreement, that she disputes a claim for indemnity that is
subject to
the Notice of Claim, the Losses specified in such Notice of Claim will
be
conclusively deemed Losses subject to indemnification hereunder and the
Escrow
Agreement and the validity of any exercise of a right of setoff under
the Note
that is described in the Notice of Claim will be deemed to be
conclusively
established. In the event that Xxxxxx
timely gives notice to Parent and, if applicable, the Escrow Agent
pursuant to
the Escrow Agreement, that she disputes such claim, the dispute shall
be
resolved in accordance with the terms of the Escrow Agreement.
ARTICLE
VIII
RELEASES
8.1
Releases by Stockholders and Xxxxxx.
Each of the Stockholders and Xxxxxx, for themselves and on behalf of
their
respective successors, heirs, personal representatives, beneficiaries,
agents,
successors and assigns, hereby releases, remises and forever discharges
the
Surviving Corporation and its predecessors, successors and assigns, and
the
directors, officers, employees, agents and representatives of the
foregoing, of
and from any and all agreements, debts, liabilities and obligations of
any
nature, fixed or contingent, known or unknown, whether at law or at
equity, by
reason of any event, occurrence, circumstances or matter of any nature
which
occurred or existed at any time on or before the Closing Date, except
for
claims:
(a)
For remuneration and benefits in the ordinary course of
business for the
current pay period;
(b)
Arising out of this Agreement and the other Transaction
Documents; and
(c)
For indemnification of Xxxxxx arising out of her service
prior to the
Closing Date as a director and/or officer of the Company.
8.2
Acknowledgement by
Stockholders and Xxxxxx.
Each of the Stockholders and Xxxxxx represents and warrants to the
Surviving
Corporation that it or she understands, comprehends and appreciates the
meaning
and significance of Section 1542 of the Civil Code of the State of
California
and, having such understanding, comprehension and appreciation, hereby
waives
any and all rights it or she may have under said Section 1542, which
provides:
"A general release does not extend to claims which the creditor does
not
know or suspect to exist in his favor at the time of executing the
release,
which if known by him, must have materially affected his settlement
with the
debtor." Each of the Stockholders and Xxxxxx acknowledges
that it and she have read
the releases set forth in this ARTICLE VIII and that each of them has
received
the advice of counsel with respect to them.
8.3
Releases by
Parent, Company and Surviving Corporation. Each of
the Parent,
Company and Surviving Corporation, for themselves and on behalf of
their
respective successors, heirs, personal representatives, beneficiaries,
agents,
successors and assigns, hereby releases, remises and forever discharges
each
Stockholder and Xxxxxx and their respective trustees, predecessors,
successors
and assigns, and the directors, officers, employees, agents and
representatives
of the foregoing, of and from any and all agreements, debts,
liabilities and
obligations of any nature, fixed or contingent, known or unknown,
whether at
law or at equity, by reason of any event, occurrence, circumstances or
matter
of any nature which occurred or existed at any time on or before the
Closing
Date, except for claims arising out of this Agreement and the other
Transaction
Documents.
8.4
Acknowledgement by
Parent, Company and Surviving Corporation. Each of
the Parent,
Company and Surviving Corporation represents and warrants to each
Stockholder
and Xxxxxx that it understands, comprehends and appreciates the meaning
and
significance of Section 1542 of the Civil Code of the State of
California and,
having such understanding, comprehension and appreciation, hereby
waives any
and all rights it may have under said Section 1542, which provides: "A
general release does not extend to claims which the creditor does not
know or
suspect to exist in his favor at the time of executing the release,
which if
known by him, must have materially affected his settlement with the
debtor." Each of the Parent, Company and Surviving
Corporation
acknowledges that it has read the releases set forth in this ARTICLE
VIII and
that each of them has received the advice of counsel with respect to
them.
ARTICLE
IX
DEFINITIONS
9.1
Definitions. In this Agreement,
the following terms have the
meanings specified or referred to in this Section 9.1
which shall be
equally applicable to both the singular and plural forms. Any
agreement
referred to below shall mean such agreement as amended, supplemented
and
modified from time to time to the extent permitted by the applicable
provisions
thereof and by this Agreement.
"Action"
means any action, suit or proceeding, claim, arbitration, litigation or
investigation.
"Affiliate"
means, (a) with respect to any Person other than an individual, any
other Person
which directly or indirectly controls, is controlled by or is under
common
control with such Person, and (b) with respect to any individual, any
member of
such individual's family.
"Code"
means the Internal Revenue Code of 1986, as amended.
"Court
Order" means any .judgment, order, writ, injunction, award,
decree,
stipulation or determination of any foreign, federal, state or local
Governmental Entity, and any award in any arbitration proceeding.
"Encumbrance"
means any security interest, lien, pledge, charge, option, right of
first
refusal, mortgage, indenture, encumbrance, claim, condition, easement,
indebtedness, defect in title, right of way, building or use
restriction,
exception, reservation, limitation, covenant or other restriction of
any kind,
nature or description, whether fixed or contingent, including, any
restriction
on use, voting, transfer, receipt of income or exercise of any other
ownership
attribute.
"Environmental
Laws" means any and all foreign, Federal, state, local or
municipal
Laws, rules, orders, regulations, statutes, ordinances, codes,
executive
orders, legally binding decrees, or other written requirements of any
Governmental Entity regulating, relating to or imposing liability or
standards
of conduct concerning pollution or protection of the environment, human
health
or safety or relating to exposure of any kind of Hazardous Materials,
as have
been or are now in effect, including but not limited to: the
Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601
et seq. ("CERCLA"); the Federal Water
Pollution Control
Act, 33 U.S.C. Section 1251 et seq.; the Clean Air Act, 42
U.S.C. Section
7401 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq.;
the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.;
the
Emergency Planning and Community Right to Know Act of 1986, 42 U.S.C.
Section
11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq.;
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq.; the
Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. Section 136
et
seq.; the Resource Conservation and Recovery Act of 1976 ("RCRA"),
42 U.S.C. Section 6901 et seq.; the Toxic Substances Control Act, 15
U.S.C.
Section 2601 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section
2701 et
seq.; and any similar or implementing state or local Law.
"Environmental
Permits" means any and all permits, licenses, registrations,
notifications, exemptions and any other authorization required under
any
Environmental Law as of the Closing Date.
"Escrow
Agent" means XX Xxxxxx Xxxxx.
"Escrow
Agreement" means an escrow agreement between Parent,
Stockholders, Xxxxxx and Escrow Agent
in the form attached hereto as Exhibit E hereto
pursuant to which the
Escrow Agent will hold and release the Escrow Shares.
"Escrow
Fund" means the Escrow Shares held by the Escrow Agent and
all income,
proceeds and interest thereon.
"Expiration
Date" has the meaning set forth in Section 7.1.
"GAAP"
means U.S.
generally accepted accounting principles, consistently applied.
"Governmental
Entity" means any foreign, federal, national, state, local,
municipal
or other government, any subdivision, agency, commission or authority
thereof,
or any quasi-Governmental Entity, court, tribunal, instrumentality or
regulatory body or other authority exercising any taxing or tax
regulatory
authority.
"Hazardous
Materials" means any hazardous substance, hazardous waste,
hazardous
material, gasoline or petroleum (including crude oil or any fraction
thereof)
or petroleum products, polychlorinated biphenyls or polychlorinated
biphenyl
containing materials, urea- formaldehyde insulation, friable asbestos
or
friable asbestos-containing materials, radon, lead-based paint,
chemicals,
substances, pollutants, contaminants, radioactivity, and any other
materials or
substances of any kind, whether solid, liquid or gas that is regulated
pursuant
to any Environmental Law or as to which there can be liability under
any
Environmental Law.
"Xxxxxx-Xxxxxx
Payables" means the accounts payable of the Company to Xxxxx
Xxxxxx
and Xxxx Xxxxxx or their respective affiliates, in the aggregate, which
shall,
as of the Effective Time, be in the aggregate amount of $175,000.
"Intentional
Breach" means a knowing or intentional misrepresentation or
breach of
this Agreement by the Company, a Stockholder or Xxxxxx.
"IRS"
means the United States Internal Revenue Service.
"Knowledge"
means (a) with respect to the Company, actual knowledge or such
knowledge as a
reasonable person would acquire after reasonable inquiry of Xxxxxx, and
(b) with respect to Parent,
actual knowledge or such knowledge as a reasonable person would acquire
after
reasonable inquiry, of Xxxx X. Xxxxx or Xxxxx Xxxxxx.
"Law"
means any federal, state, local or foreign law (including common law),
constitution, statute, code, ordinance, rule, regulation, executive
order or
similar requirement.
"Leased
Premises" has the meaning set forth in Section
3.12(a).
"Material
Adverse Change" or "Material Adverse Effect"
means
(i) any change in, or effect on, the business or prospects of the
Company as
currently conducted or currently contemplated that is reasonably likely
to be
materially adverse to the business, operations, condition (financial or
otherwise),
prospects, assets or liabilities of the Company or (ii) any material
adverse
effect on the ability of any party hereto to consummate the
transactions
contemplated by this Agreement; in each case other than arising from or
relating to (1) general business or economic conditions, (2) national
or
international political or social conditions, including the engagement
by the
United States in hostilities, whether or not pursuant to the
declaration of a
national emergency or war, or the occurrence of any military or
terrorist
attack upon the United States, or any of its territories, possessions,
or
diplomatic or consular offices or upon any military installation,
equipment or
personnel of the United States, (3) financial, banking, or securities
markets
(including any disruption thereof and any decline in the price of any
security
or any market index), or (4) changes in United States generally
accepted
accounting principles.
"Order"
means any award, injunction, judgment, decree, order, ruling, subpoena
or
verdict or other decision entered, issued or rendered by any
Governmental
Entity.
"Permitted
Encumbrance" means (i) any statutory lien for Taxes not yet
due; (ii)
any statutory lien of a landlord, carrier, warehouseman, mechanic or
materialman incurred for sums not yet due; (iii) purchase money claims
and
claims securing retail payments under capital lease arrangements; and
(iv)
liens that are immaterial in character, amount and extent and which do
not
materially detract from the value or interfere with the present use of
the
properties they affect.
"Person"
means any individual, corporation, partnership, joint venture,
association,
joint-stock company, limited liability company, trust, unincorporated
organization or Governmental Entity.
"Pre-Closing
Environmental Conditions" means any and all conditions of any
of the
Leased Premises, or any other property formerly (since December 31,
2005) owned
or leased by the Company, or that is attributable to the operations or
properties of the Company, including soil, surface water and
groundwater
contamination, resulting from the disposal or release of Hazardous
Materials,
which condition was in existence on, in, under or at, or arose from,
such
property on or before the Closing Date including any migration of
Hazardous
Materials first released prior to the Closing Date.
"Prime
Rate" means, on any date, a variable rate per annum equal to
the rate
of interest most recently published by The Wall Street Journal as the
"prime rate" at large U.S.
money center banks.
"Product"
has the meaning set forth in Section 3.27(a).
"Real
Estate Lease" has the meaning set forth in Section
3.12(a).
"Release"
means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging,
injecting, escaping, leaching, dumping or disposing into the
environment or the
workplace of any Hazardous Materials, or otherwise as defined in any
Environmental Law.
"Tax"
or "Taxes" means, with respect to any Person, all federal,
state,
county, local and foreign taxes, including but not limited to income
(whether
net or gross), alternative or add-on minimum, estimated, accumulated
earnings,
gross income, gross receipts, profits, franchise, windfall profits,
severance,
property, production, sales, use, transfer, gains, occupation,
privilege,
license, excise, employment, payroll, wage, unemployment, disability,
workers'
compensation, social security, withholding, personal holding company,
value-added, capital, stamp, premium, environmental (including taxes
under Code
Section 59A), capital stock, real property, personal property,
registration or
minimum tax, or any other tax, custom, duty, governmental fee or other
like
assessment or charge of any kind whatsoever, together with any interest
or any
penalties, additions to tax or additional amounts imposed by any
Governmental
Entity on such Person or the assets of such person (if any).
"Tax
Liabilities" mean (a) all liabilities for actual Taxes and
(b) all
reasonable out-of-pocket costs and expenses related thereto incurred as
a
result of the commencement of a Tax Proceeding (including, without
limitation,
reasonable attorneys' and accountants' fees).
"Tax
Proceeding" means any audit, other administrative proceeding
or
judicial proceeding involving Taxes.
"Tax
Return" means any return, report, estimate or similar
statement filed
or required to be filed with any Governmental Entity with respect to
any Taxes
(including any attached schedules or supporting information),
including,
without limitation, any consolidated, combined and unitary return,
information
return, claim for refund, amended return and declaration of estimated
Tax.
"Transaction
Documents" means this Agreement, the Escrow Agreement and the
Notes.
ARTICLE
X
MISCELLANEOUS
10.1
Modifications, Waiver of Rights.
Any amendment, change or
modification of this Agreement shall be void unless in writing and
signed by
all parties hereto. No failure or delay by any party hereto
in exercising
any right, power or privilege hereunder (and no course of dealing
between or
among any of the parties) shall operate as a waiver of any such right,
power or
privilege. No waiver of any default on any one occasion shall
constitute
a waiver of any subsequent or other default. No single or
partial
exercise of any such right, power or privilege shall preclude the
further or
full exercise thereof.
10.2
Notices. All
notices and other communications hereunder shall be in writing and
shall be
deemed to have been duly given when delivered by hand, by facsimile
(receipt
acknowledged), recognized overnight courier (receipt acknowledged) or
by
certified mail return receipt confirmed, addressed as follows:
If
to Parent, Merger Sub or the Surviving Corporation:
inTEST Corporation
0 Xxxxxxxxxx Xxxx
Xxxxxx Xxxx, XX 00000
Fax No.: (000) 000-0000
Attention: Xxxx X. Xxxxx Xx.
With a copy to:
Xxxx Xxxxx LLP
0000 Xxxxxx Xxxxxx,
00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Fax No.: 000-000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to the Company, either Stockholder or Xxxxxx:
0000 Xxxxxxxx Xxxxx
Xx Xxxxx, XX 00000
Fax No.:
Attention: Xxxxx X. Xxxxxx
with a copy to:
Xxxxxx & Xxxxxxx, A.P.C.
000 X. X Xxxxxx
# 0000
Xxx Xxxxx, XX 00000
Fax No.: (000) 000-0000
Attention: Xxxx Xxxxx, Esq.
or
to such other address as to
any party hereto as such party shall designate by like notice to the
other
parties hereto.
10.3
Counterparts.
This Agreement may be executed by facsimile and in one or more
counterparts,
each of which shall be deemed an original but all of which counterparts
collectively shall constitute one instrument. The
transmission of a
signed counterpart of this Agreement by facsimile or by portable
document file
("PDF") shall have the same force and effect as
delivery of an
original signed counterpart of this Agreement, and shall constitute
valid and
effective delivery for all purposes. If either party delivers
a signed
counterpart of this Agreement by transmission of a facsimile or PDF, it
shall
also send promptly thereafter by overnight courier or personal delivery
a
signed original counterpart of this Agreement to the other party, but
failure
to do so shall not render this Agreement void or voidable by either
party.
10.4
Expenses.
Except as expressly provided herein, each of the parties hereto will
bear all
costs, charges and expenses incurred by such party in connection with
this
Agreement and the consummation of the transactions contemplated herein,
including, without limitation, attorneys' fees and disbursements
incurred in
connection with the negotiation and preparation of this
Agreement. Parent
agrees that it or Surviving Corporation will bear the cost of the work
by LevitzZack,
CPAs, in connection with the preparation by the Company for an audit of
Company's calendar year 2006 and 2007 financial statements and of any
other
pre-closing financial statements of the Company that Parent or
Surviving
Corporation choose to have audited.
(a)
The parties agree that Xxxxxx & Xxxxxxx, A
Professional Corporation
("F&B"), has represented both Stockholders
and Xxxxxx, on the one hand,
and Company, on the other hand, with respect to this
Agreement. The
parties agree that the aggregate fees and expenses of F&B shall
be
allocated and paid 50% by Stockholders and Xxxxxx, on the one hand, and
50% by Company,
on the other hand.
(b)
Parent, Company and Surviving Corporation expressly consent
to F&B
and/or its individual attorneys continuing to represent any Stockholder
and/or Xxxxxx following the Closing, despite F&B's prior
representation of Company, including representation of any Stockholder
and/or Xxxxxx following the
Closing on matters relating in any way to this Agreement or the
Transaction
Documents.
10.5
Arbitration. Except
for disputes, controversies, or claims arising under Section
6.1(b)
hereto and for other claims seeking specific performance or injunctive
or other
equitable relief, and except as expressly provided elsewhere in this
Agreement
or the other Transaction Documents, any dispute, controversy, or claim
arising
under or relating to this Agreement or the other Transaction Documents
or any
breach or threatened breach thereof ("Arbitrable Dispute")
shall be resolved by final and binding arbitration administered by the
American
Arbitration Association ("AAA") under its Commercial
Arbitration Rules, subject to the following:
(a)
Any party may demand that any Arbitrable Dispute be submitted
to binding
arbitration in accordance with this Section 10.5.
The demand for
arbitration shall be in writing, shall be served on the other party in
the
manner prescribed herein for the giving of notices, and shall set forth
a short
statement of the factual basis for the claim, specifying the matter or
matters
to be arbitrated.
(b)
The arbitration shall be conducted by a panel of three
arbitrators, one
selected by Parent, one selected by Xxxxxx and the third to be selected
jointly
by the arbitrators selected by Parent and Xxxxxx (collectively, the "Arbitrators"),
who shall conduct such evidentiary or other hearings as they deem
necessary or
appropriate and thereafter shall make their determination as soon as
practicable. If any party fails to appoint an arbitrator to be
appointed by
such party as provided in the preceding sentence within 30 days after
delivery
of a demand for arbitration, then AAA shall appoint such arbitrator.
Any
arbitration pursuant hereto shall be conducted by the Arbitrators under
the
guidance of the Federal Rules of Civil Procedure and the Federal Rules
of
Evidence, but the Arbitrators shall not be required to comply strictly
with
such Rules in conducting any such arbitration. All such arbitration
proceedings
shall take place in Wilmington, Delaware, if initiated by Parent or
Surviving
Corporation, or in the state of Xxxxxx'x
residence, if initiated by a Stockholder or Xxxxxx.
(c)
Except as provided herein:
(i)
each party to the arbitration shall bear its own "Costs
and Fees,"
which are defined as all reasonable pre award expenses of the
arbitration,
including travel expenses, out of pocket expenses (including, but not
limited
to, copying and telephone) expert and other witness fees, and
reasonable
attorney's fees and expenses;
(ii) the
fees and expenses of the Arbitrators and all other costs and expenses
incurred
in connection with the arbitration ("Arbitration Expenses")
shall be borne equally by the parties to the arbitration; and
(iii) notwithstanding
the foregoing, the Arbitrators shall be empowered to require any one or
more of
the parties to the arbitration to bear all or any portion of such Costs
and
Fees and/or the Arbitration Expenses in the event that the Arbitrators
determine such party has acted unreasonably or in bad faith.
(d)
The Arbitrators shall have the authority to award any remedy
or relief
that a Court of the State of Delaware could order or grant, including,
without
limitation, specific performance of any obligation created under the
Transaction Documents, the awarding of Losses or punitive damages, the
issuance
of an injunction, or the imposition of sanctions for abuse or
frustration of
the arbitration process. The Arbitrators shall render their decision
and award
upon the concurrence of at least two (2) of their number.
Such decision
and award shall be in writing and counterpart copies thereof shall be
delivered
to each party to the arbitration. The decision and award of the
Arbitrators
shall be binding on all parties. In rendering such decision and award,
the
Arbitrators shall not add to, subtract from or otherwise modify the
provisions
of the Transaction Documents and shall make its determinations in
accordance
therewith. Any party to the arbitration may seek to have judgment upon
the
award rendered by the Arbitrators entered in any court having
jurisdiction
thereof.
(e)
Each party agrees that it will not file any suit, motion,
petition or
otherwise commence any legal action or proceeding for any matter which
is
required to be submitted to arbitration as contemplated herein except
in
connection with the enforcement of an award rendered by the
Arbitrators. Upon
the entry of an order dismissing or staying any action or proceeding
filed
contrary to the preceding sentence, the party which filed such action
or
proceeding shall promptly pay to the other party the reasonable
attorney's
fees, costs and expenses incurred by such other party prior to the
entry of
such order.
10.6
Binding Effect;
Assignment. This Agreement shall be binding upon
and inure to the
benefit of Parent and the Company and their representatives,
successors, heirs
and permitted assigns, in accordance with the terms hereof.
Neither the
Company, any Stockholder or Xxxxxx
may assign this Agreement or any of its rights or obligations hereunder
without
the prior written consent of Parent.
10.7
Entire Agreement.
This Agreement and the other schedules and agreements referred to
herein
(including the Assignment of Lease and Consent to Assignment of Lease
among the
Company, Merger Sub and XXXX Investments), constitute the entire
agreement
between the parties hereto and supersede all prior agreements,
representations,
warranties, statements, promises, information, arrangements and
understandings,
whether oral or written, express or implied, with respect to the
subject matter
hereof.
10.8
Governing Law.
This Agreement and its validity, construction, enforcement, and
interpretation
shall be governed by the substantive laws of the State of Delaware.
10.9
Invalid Provisions.
If any provision of this Agreement is deemed or held to be illegal,
invalid or
unenforceable, this Agreement shall be considered divisible and
inoperative as
to such provision to the extent it is deemed to be illegal, invalid or,
unenforceable, and in all other respects this Agreement shall remain in
full
force and effect; provided, however,
that if any provision of
this Agreement is deemed or held to be illegal, invalid or
unenforceable there
shall be added hereto automatically a provision as similar as possible
to such
illegal, invalid or unenforceable provision and be legal, valid and
enforceable. Further, should any provision contained in this
Agreement
ever be reformed or rewritten by any judicial body of competent
jurisdiction,
such provision as so reformed or rewritten shall be binding upon all
parties
hereto.
10.10 Remedies.
The
Company acknowledges that the Business is unique, and recognizes and
affirms
that in the event of a breach of this Agreement by the Company,
monetary
damages may be inadequate and Parent may have no adequate remedy at
law.
Accordingly, in the event of any such breach, Parent may, in addition
to any
other rights and remedies existing in its favor, enforce its rights and
the
obligations of the Company hereunder by an Action or actions for
specific
performance, injunctive and/or other relief, without any requirement of
proving
actual damages. Each party's remedies under this Agreement
are cumulative
and shall not exclude any other remedies to which any party may be
lawfully
entitled.
10.11 Schedules.
All capitalized terms used in the schedules hereto, unless otherwise
defined
therein have the meaning set forth in this Agreement. The
section
references referred to in the schedules are to the sections of this
Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement and
Plan of Merger to be duly executed as of the date and year first above
written.
|
PURCHASER: |
COMPANY: |
|
MERGER
SUB: |
STOCKHOLDERS: |
List of Exhibits:
|
Form of Certificate of Merger |
Exhibit A |
|
Form of Note |
Exhibit B |
|
Form of Legal Opinion of Company's Counsel |
Exhibit C |
|
Form of Legal Opinion of Parent's Counsel |
Exhibit D |
|
Form of Escrow Agreement |
Exhibit E |
|
Form of Security Agreement |
Exhibit F |
EXHIBIT A
CERTIFICATE OF MERGER
OF
SIGMA SYSTEMS CORP.
INTO
SIGMA ACQUISITION, INC.
The undersigned corporation Sigma Acquisition, Inc.
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the constituent corporations of the merger are as follows:
NAME STATE OF INCORPORATION
Sigma
Acquisition, Inc.
Delaware
Sigma Systems Corp.
California
SECOND: That an Agreement of Merger between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of Section 252 of the General Corporation Law of Delaware and Section 1100 of the General Corporation Law of California.
THIRD: That the name of the surviving corporation of the merger is Sigma Acquisition, Inc., a Delaware corporation.
FOURTH: That Article FIRST of the Certificate of Incorporation of Sigma Acquisition, Inc., a Delaware corporation, which is the surviving corporation of the merger, shall be amended to read in its entirety as follows: "The name of the corporation is SigmaSYS Corp.".
FIFTH: That the executed Agreement of Merger is on file at the principal place of business of the surviving corporation, the address of which is:
0 Xxxxxxxxxx Xxxx, Xxxxxx Xxxx, Xxx Xxxxxx 00000
SIXTH: That a copy of the Agreement of Merger will be furnished by the surviving corporation, on request and without cost, to any stockholder of either constituent corporation.
SEVENTH: The authorized capital stock of each foreign corporation which is a party to the merger is as follows:
Par value
per share
or statement that
shares are without
Corporation
Class
Number of Shares
par value
Sigma Systems Corp. Common 1,000,000 No par value
EIGHTH: That this Certificate of Merger shall be effective upon filing with the Secretary of the State of Delaware (the "Effective Date").
Dated: October__, 2008
SIGMA
ACQUISITION, INC.
By:___________________________
Xxxx X. Xxxxx, Xx.
Secretary
EXHIBIT B
PROMISSORY NOTE #1
[There would be two separate notes, one to each Stockholder, pro rata in accordance with their respective stock ownership. The Note below is the form of Note payable to the 75.77332% stockholder, with the Note payable to the other Stockholder being identical except for the payee name, principal amount and share percentage.]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THIS NOTE MAY NOT BE TRANSFERRED OR PLEDGED UNLESS IT HAS BEEN REGISTERED UNDER ALL APPLICABLE SECURITIES LAWS, OR THE MAKER HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE MAKER TO THE EFFECT THAT THE PROPOSED TRANSACTION IS EXEMPT FROM SUCH REGISTRATION REQUIREMENTS.
|
Amount : $[____________] |
Date:
_________, 2008 |
FOR VALUE RECEIVED, inTEST Corporation, a Delaware corporation ("Maker"), promises to pay to [Xxxxx X. Xxxxxx, Trustee of the Xxxxx X. Xxxxxx Trust, a sub-trust of the Xxxxxx X. Xxxxxxx Separate Property Trust dated March 17, 2003] (hereinafter referred to as "Payee"), the principal sum of [_________] Dollars ($[__________]) in lawful money of the United States of America, together with interest on the unpaid principal amount at the "Prime Rate" plus one and one quarter percent (1.25%). For the purposes of this Note, the "Prime Rate" means a variable rate per annum equal to the rate of interest most recently published by The Wall Street Journal as the "prime rate" at large U.S. money center banks, which Prime Rate is, as of the date of this Note, ___ per annum. This Note is non-negotiable. The obligations under this Note are secured pursuant to a security agreement dated ___________, 2008 among SigmaSYS Corp., Payee and the payee under the Ancillary Note (defined below) (the "Security Agreement").
This Note is one of two Notes referred to in that certain Agreement and Plan of Merger dated as of October ___, 2008 by and among Maker, Payee, Sigma Systems Corp. and certain other parties (the "Merger Agreement"), and together with the Ancillary Note (defined below) shall be subject to setoff as set forth in the Merger Agreement, provided that any such setoff against this Note shall be [75.77332%] of the total amount setoff. Any such setoffs against amounts due under this Note shall be applied first to principal and then to interest. Except as described in this paragraph, the obligations of Maker are an absolute, unconditional and irrevocable promise to pay without setoff or deduction all payments due strictly and according to the terms of this Note and no reference to any collateral agreement is intended to give rise to any right of setoff or deduction.
By way of background, Maker issued two promissory Notes under the Merger Agreement, this Note and a promissory note of the same date and with identical terms, except the payee and initial principal amount of such other note are different (the "Ancillary Note").
Principal and interest due under this Note shall be payable as follows: (i) a payment of accrued but unpaid interest on the first anniversary of the Closing Date; and (ii) subsequent annual payments of principal and accrued but unpaid interest on each of the next four anniversaries of the Closing Date, with the amount of each such payments of principal and interest equaling the sum of (A) the accrued but unpaid interest as of such payment date plus (B)(I) the total amount of principal then outstanding divided by (II) the number of payments of principal then remaining to be paid (such that the portion of the outstanding principal due on each such anniversary would be equal, unless the principal has been prepaid, set off or otherwise reduced, in which case the payments remaining after any such reduction would be equal).
All payments shall be made to Payee at the address for notices to Payee or at such other place as the holder may from time to time designate for payments. Maker shall have the privilege of prepaying principal in whole or in part at any time, and such prepayments may be made without penalty or premium; provided, however, that each prepayment shall be accompanied by any accrued interest then due. However, excess payments or prepayments shall not be credited as regular future payments, nor excuse the Maker from making the payments provided herein.
Maker will be in default if any of the following happens: (a) Maker fails to make any payment hereunder or under the Ancillary Note within ten days of the due date thereof; (b) with respect to payment obligations of Maker under the Merger Agreement, it is finally determined (by agreement of Maker or, alternatively, by a non-appealable arbitration or judicial decision) that Maker has failed to make any payment to Payee, the payee under the Ancillary Note or Xxxxx X. Xxxxxx, as the case may be, strictly in the manner provided in this Note, the Ancillary Note or the Merger Agreement; (c) Maker becomes insolvent, a receiver is appointed for any part of Maker’s property, Maker makes an assignment for the benefit of creditors, or any proceeding is commenced either by Maker or against Maker under any bankruptcy or insolvency laws, or (d) there occurs a default on the part of SigmaSYS Corp. under the Security Agreement. Maker and all endorsers of this Note waive presentment for payment, protest, notice of dishonor, and except as specifically provided above notice before declaring a default.
Upon default, the Payee or such holder hereof may declare the entire unpaid balance of principal of and interest on this Note to be immediately due and payable, without notice, and then Maker will pay that amount to Payee. Any overdue principal of and, to the extent permitted by law, overdue interest on, this Note shall automatically and without notice bear interest, payable on demand, until paid at a rate equal to four percent (4%) per annum over the interest rate set forth herein. Time is of the essence hereof.
Any term of this Note may be amended and the observance of any term of this Note may be waived (either generally or in a particular instance and either retroactively or prospectively) only in writing by the holder hereof. Maker or any holder of this Note may delay in enforcing its rights or in giving any notices without losing its rights.
This Note shall be construed according to, and shall be governed by, the laws of the State of Delaware. The provisions of this Note shall be deemed severable, so that if any provision hereof is declared invalid under the laws of any state where it is in effect, or of the United States, all other provisions of this Note shall continue in full force and effect. This Note may be amended only by a writing signed on behalf of each party.
All notices to be given with regard to this Note shall be in writing and shall be deemed to have been duly given when delivered by hand, by facsimile (receipt acknowledged), recognized overnight courier (receipt acknowledged) or by certified mail return receipt confirmed, addressed as follows: (a) if to Maker: inTEST Corporation, 0 Xxxxxxxxxx Xxxx, Xxxxxx Xxxx, XX 00000, Fax No.: (000) 000-0000, Attention: Xxxx X. Xxxxx Xx. and (b) if to Payee: c/o Xxxxx X. Xxxxxx, 0000 Xxxxxxxx Xxxxx, Xx Xxxxx, XX 00000, or to such other address as to either as designated by like notice to the other.
If this Note is placed in the hands of any attorney for collection, regardless of whether or not a lawsuit is filed, Maker shall reimburse holder for any reasonable attorney fees incurred.
This Note shall be binding upon the successors and assigns of Maker, and shall inure to the benefit of and be enforceable by the successors and assigns of Payee or any other holder hereof. This Note is intended to take effect as an instrument under seal.
IN WITNESS WHEREOF, the undersigned has duly executed, sealed and delivered this Note as of the date and year first written above.
Maker:
inTEST Corporation
By:___________________________
Name: Xxxx X. Xxxxx, Xx.
Title: Chief Financial Officer
EXHIBIT C
______________, 2008
Board of Directors of
inTEST Corporation
0 Xxxxxxxxxx Xxxx
Xxxxxx Xxxx, XX 00000
Re: Sigma Systems Corp.
Ladies and Gentlemen:
This opinion is being furnished to you in connection with that certain Agreement and Plan of Merger (together with all exhibits and schedules thereto, the "Agreement") by and amongst: (i) Sigma Systems Corp., a California corporation (the "Company"), (ii) inTEST Corporation, a Delaware corporation (the "Parent") (iii) Sigma Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), (iv) Xxxxx X. Xxxxxx, Trustee of the Exemption Trust, a sub-trust of the Xxxxxx X. Xxxxxxx Separate Property Trust, dated March 17, 2003 (the "Exemption Trust"), (v) Xxxxx X. Xxxxxx, Trustee of the Xxxxx X. Xxxxxx Trust, a sub-trust of the Xxxxxx X. Xxxxxxx Separate Property Trust, dated March 17, 2003 (the "Q-TIP Trust" and, together with the Exemption Trust, the "Stockholders"), and (vi) Xxxxx X. Xxxxxx ("Xxxxxx"). Capitalized terms used in this opinion letter that are not otherwise defined herein shall have the meaning ascribed to them in the Agreement. This opinion is delivered pursuant to Section 5.1(m) of the Agreement and in satisfaction of a condition to Parent and Merger-Sub's obligations to consummate the transactions contemplated by the Agreement.
We presently and in the past have acted as special counsel to the Company only with respect to certain, specific legal matters requested of us by the Company, including but not limited to the drafting of the Agreement and the ancillary documents and agreements referenced therein and/or required thereby, including this opinion letter (collectively with the Agreement, the "Transaction Documents"). We have not previously represented the Stockholders or Xxxxxx, individually or in her capacity as trustee, other than in connection with the drafting of the Transaction Documents. We do not continuously and regularly represent the Company in its business affairs and instead only represent the Company on a sporadic, as-requested basis.
In rendering the opinions hereinafter expressed, we have examined and relied upon only the following documents and instruments:
- A copy of the articles of incorporation of the Company, as amended and restated on July 14, 1995, certified by the Secretary of State of the State of California;
- A certificate of status from the California Secretary of State indicating that the Company is in good standing in California as of _______________;
- The bylaws of the Company, as amended and restated effective February 10, 2003, certified by its Secretary;
- The Transaction Documents;
- A copy of the Declaration of Trust of the Xxxxxx X. Xxxxxxx Separate Property Trust dated March 17, 2003, and a Certification of Trust with respect to that trust and its division into two sub-trusts following the death of Xxxxxx X. Xxxxxxx, namely the Exemption Trust and the Q-TIP Trust, executed by Xxxxxx on March 18, 2005 (the "Trust Documents");
- Copies of resolutions of the shareholders and of the sole member of the board of directors of the Company, with respect to the approval of the Transaction Documents;
- Such advices, certificates and other documents of public officials, officers and representatives of the Company, the Stockholders and others as we have deemed relevant or appropriate as a basis for the opinions set forth herein; and
- Such other agreements, documents are records as we deemed relevant or appropriate as a basis for the opinions set forth herein.
In conducting our examination, we have assumed, without investigation, the genuineness of all signatures, the correctness of all certificates, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, photostatic or .pdf copies and the accuracy and completeness of all records made available to us by the Company, Xxxxxx or by either of the Stockholders. In rendering our opinions below, we have assumed, without investigation, that any certificate or other document on which we have relied that was given or dated earlier than the date of this letter continued to remain accurate insofar as relevant to such opinions, from such earlier date through and including the date of this letter. In addition, we have relied upon and assumed, without investigation or independent verification, the accuracy of the representations, warranties, and covenants as to factual matters made by any party in the Transaction Documents, and the accuracy of representations and statements as to factual matters made by the Company, Xxxxxx, the Stockholders and any public official. Any such investigation would be beyond the scope of this opinion and of our engagement.
If and whenever a statement herein is qualified by "known to us," "we are not aware," "to our knowledge," or similar phrase, it is intended to indicate that, during the course of our representation, as applicable, of the Company, Xxxxxx or the Stockholders, no information that would give us current actual knowledge of the inaccuracy of such statement has come to the attention of those attorneys in this firm who have rendered legal services in connection with the Agreement, the Transaction Documents or this opinion letter. However, other than the examination described above in the third paragraph of this letter, we have not undertaken any independent investigation to determine the accuracy of such statement, and any limited inquiry undertaken by us during the preparation of this opinion should not be regarded as such an investigation; no inference as to our knowledge of any matters bearing on the accuracy of any such statement should be drawn from the fact of our representation, as applicable, of the Company, Xxxxxx or the Stockholders.
The opinions expressed herein are subject, without investigation, to the following assumptions:
- Each of the Transaction Documents is a valid, binding, and enforceable obligation of the respective parties thereto (other than the Company, Xxxxxx or each of the Stockholders, as applicable).
- Other than the Company, Xxxxxx and Stockholders, no party to the transaction contemplated by the Transaction Documents, or any document or oral agreement relating thereto, is subject to any statute, rule, or regulation, or to any impediment to which contracting parties are generally not subject, that requires the Company, Xxxxxx, either of the Stockholders or such party to obtain the consent of, or to make a declaration or filing with, any governmental authority.
- There is no action, suit or proceeding affecting the Company, the Stockholders or Xxxxxx which questions the legality or propriety of the transactions contemplated by the Transaction Documents, and we have no actual knowledge that any such action, suit or proceeding exists.
- The Transaction Documents are timely delivered by Xxxxxx, the Company or the Stockholders, as applicable, Seller as required by the terms of such Transaction Documents.
- All of the conditions set forth in the Transaction Documents will be satisfied or waived and any required approvals or consents with respect to the Transaction Documents have been obtained.
- All terms, provisions, and conditions of, or relating to, the transactions contemplated by the Transaction Documents are correctly and completely reflected in the Transaction Documents, as applicable.
The opinions expressed herein are subject to the following qualifications:
- Our opinions in paragraph 1 below as to the qualification and good standing of the Company is based solely upon copies of certificates from public officials described above regarding the qualification and good standing of the Company in the jurisdiction in which it was formed.
- Our opinion in paragraph 2 and in clause (i) of paragraph 9 below are based solely upon copies of the Trust Documents delivered to us by the Stockholders and referenced in paragraph 5 above.
- We express no opinion, and expressly disclaim any representation, regarding the effect of bankruptcy, insolvency, reorganization, moratorium, liquidation, receivership, assignment for the benefit of creditors, fraudulent transfer, marshaling and other laws relating to or affecting the rights and remedies of creditors generally or relating to equitable principles of general application, including but not limited to those matters expressly set forth herein.
- We express no opinion with respect to compliance with local or municipal law, antitrust, environmental, land use, securities or labor and employment laws or regulations, nor compliance by Xxxxxx - individually or in her capacity as an officer or director of the Company, or as trustee of the Stockholders, as applicable - with her fiduciary duties.
- Our opinions below are limited to the extent that the performance and enforceability of any agreement by or against any party may be subject to: (i) the availability of the remedy of specific performance or of injunctive relief or of any other equitable remedy; (ii) the application by a court of the general principles of equity; and (iii) as to the enforceability against Xxxxxx or the Stockholders of the indemnification provisions of the Agreement, principles of public policy.
- We express no opinion, and expressly disclaim any representation, regarding the conclusive effect of certain statements, acknowledgments or recitals contained in the Agreement or any of the Transaction Documents.
- We express no opinion as to the effect or enforceability as to any provision involving consent to or establishment of jurisdiction and/or venue, choice of law or stipulations with respect thereto or dispute resolution procedures.
- We express no opinion, and none should be inferred, as to compliance by the Buyer with any state or federal law or regulation that may, because of the nature of its business, be applicable to the Transaction Documents.
- Our opinions below are limited to the matters expressly set forth in this letter, and no opinion is to be implied or may be inferred beyond the matters expressly so stated.
- We disclaim any obligation to update this opinion for events occurring after the date of this opinion.
- For purposes of our opinion in paragraph 8, we have considered only those laws and regulations that in our experience are normally applicable to transactions of the type contemplated in the Transaction Documents, and our opinions do not extend to licenses, permits and approvals necessary for the conduct of the business of the Company. Without limiting the previous sentence, we express no opinion with respect to: (i) the effect of any land use, safety, hazardous material, environmental or similar law, or any local or regional law, or any consents, approvals, authorizations or other actions by or any filing with any city, county, or other municipality or local governmental authority; (ii) the effect of or compliance with any state or federal laws or regulations applicable to the transactions contemplated by the Transaction Documents because of the nature of the business of any party thereto other than the Company, the Stockholders or Xxxxxx; (iii) any antitrust, antifraud, patent, copyright, trademark or other intellectual property matter; or (iv) Section 721 (as amended by Section 5021 of the Omnibus Trade and Competitiveness Act of 1988, the so-called "Exon-Xxxxxx" provision) of the Defense Production Act of 1950 and the regulations thereunder.
- Our opinions below are limited to the effect of the federal laws of the United States and the state laws of the State of California; accordingly, we express no opinion as to the applicability of the laws of any other jurisdiction, or the effect thereof, on the transactions contemplated by the Transaction Documents, and we express no opinion regarding the statutes, administrative decisions, rules or regulations of any county, municipality, subdivision or local authority of any jurisdiction.
- We express no opinion, and none should be inferred, as to (i) compliance by the Company with any state or federal law or regulation that may, because of the nature of its business, be applicable to the Agreement or to the Transaction Documents to which the Company is a party; (ii) federal or state income tax, franchise or other laws, rules or regulations relating to taxation; (iii) federal or state securities laws; (iv) antitrust laws; (v) the accuracy of any matter of fact or law set forth in the Agreement or any of the Transaction Documents, except to the extent that any such matter is also set forth as part of our opinion below; or (vi) any documents or the effect thereof other than the Agreement or the Transaction Documents.
- Except for the opinions expressly provided in the numbered paragraphs below, we express no opinion regarding any specific representation or warranty of the Company, Xxxxxx or the Stockholders, as applicable, in the Agreement or any of the Transaction Documents.
Based upon and subject to the foregoing, we are of the opinion that, under the laws of California now in effect:
- The Company is duly incorporated and validly existing under the laws of the State of California, with the requisite corporate power and corporate authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations thereunder.
- Each Stockholder that is a trust has been duly created and is validly existing under the laws of the State of California and each such trust possesses full power and authority to carry out the transactions contemplated by the Transaction Documents to which it is a party.
- Each of the Transaction Documents to which the Company is a party has been duly authorized by all necessary corporate action on the part of the Company and has been duly executed and delivered by the Company.
- Each of the Transaction Documents to which a Stockholder is a party has been duly authorized by all necessary trustee action on the part of the applicable trust Stockholder and has been duly executed and delivered by the Trustee of the applicable trust Stockholder.
- Each of the Transaction Documents to which the Company is a party is a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.
- Each of the Transaction Documents to which a Stockholder that is a trust is a party is a legal, valid and binding obligation of such Stockholder enforceable against such Stockholder in accordance with its terms.
- Immediately prior to the Closing, the authorized stock of the Company consists of one million (1,000,000) shares of common stock, no par value, of which one thousand (1,000) shares (the "Common Stock") are issued and outstanding, which shares are held beneficially and of record by the Stockholders in the amounts set forth in Schedule 3.3 to the Agreement. The Common Stock has been validly issued, fully paid and non-assessable. We have not represented the Company with respect to any outstanding options, warrants or other securities or rights exercisable for or convertible into any securities of the Company nor have we, during the course of our representation of the Company, become aware of any such outstanding options, warrants or other securities or rights exercisable for or convertible into any securities of the Company.
- The execution and delivery of the applicable Transaction Documents and the performance by the Company of its obligations thereunder do not (i) violate the articles of incorporation or bylaws of the Company, or (ii) violate any federal or California laws or regulations applicable to the Company that in our experience is typically applicable to companies engaged in the same line of business as the Company, or (iii) result in a violation of any court order or court decree known to us.
- The execution and delivery of the applicable Transaction Documents and the performance by a Stockholder of its obligations thereunder do not (i) violate the trust instrument of such Stockholder, (ii) violate any federal or California laws or regulations applicable to such Stockholder that in our experience is typically applicable to irrevocable trust's holding shares of privately held stock, or (iii) result in a violation of any court order or decree known to us.
- Except as disclosed in the Company Disclosure Schedule, we are not representing the Company in any lawsuit or other proceeding by or against the Company or its properties before any court, arbitrator or governmental agency or authority.
This opinion is rendered for the benefit of the addressee in connection with the transactions described in the Agreement and the other Transaction Documents and it may be relied upon by you only in connection therewith. Without our prior written consent, this opinion letter may not be: (i) relied upon by any other person or entity or for any other purpose; (ii) quoted in whole or in part or otherwise referred to in any report or document; or (iii) furnished (the original or copies thereof) to any person or entity except in connection with the enforcement of the Agreement or the other Transaction Documents.
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Respectfully, |
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________________________________ |
EXHIBIT D
October 6, 2008
Xxxxx X. Xxxxxx, individually, and as trustee of
each of the Exemption Trust, a sub-trust of the
Xxxxxx X. Xxxxxxx Separate Property Trust dated
March 17, 2003 and of the Xxxxx X. Xxxxxx
Trust, a sub-trust of the Xxxxxx X. Xxxxxxx
Separate Property Trust dated March 17, 2003
0000 Xxxxxxxx Xxxxx
Xx Xxxxx, XX 00000
Re: Agreement and Plan of Merger
We have acted as counsel to inTEST Corporation, a Delaware corporation (the "Parent") and Sigma Acquisition, Inc., a Delaware corporation (the "Merger Sub"), with regard to that certain Agreement and Plan of Merger dated as of October 6, 2008 (the "Merger Agreement") by and among the Parent, the Merger Sub, Sigma Systems Corp., a California corporation (the "Company"), the stockholders of the Company, and Xxxxx X. Xxxxxx, pursuant to which, among other things, the Company would merge with and into the Merger Sub (such transaction, the "Merger"). This opinion is being rendered pursuant to Section 5.2(g) of the Merger Agreement. All capitalized terms used and not defined herein will have the meanings ascribed to them in the Merger Agreement.
In connection with this opinion letter, we have examined originals, or copies certified or otherwise identified to our satisfaction, of: (i) the certificate of incorporation of the Parent (the "Certificate of Incorporation"); (ii) the by-laws of the Parent (the "By-Laws"); (iii) the certificate of incorporation of the Merger Sub; (iv) the by-laws of the Merger Sub; (v) the Merger Agreement; (vi) the Escrow Agreement; (vii) such advices, certificates and other documents of public officials, officers and representatives of the Parent, the Merger Sub and others as we deemed relevant or appropriate as a basis for the opinions set forth herein, and (viii) such other agreements, documents and records as we deemed relevant or appropriate as a basis for the opinions set forth herein. The documents listed as included in items (v) and (vi) above are referred to herein as the "Transaction Documents."
We express no opinion concerning the laws of any jurisdiction other than the federal law of the United States and the laws of the state of Delaware, in each case in effect as of the date hereof, and exclusive of the conflict of laws provisions thereof and we express no opinion on the state securities or "Blue Sky" laws of any state. Our opinion is also limited to a consideration of judicial decisions that are published in recognized legal authorities or readily available in electronic databases.
Our opinion is specifically subject to the following assumptions and exceptions:
a) To the extent that we have relied upon original documents or copies thereof, we have, with your permission, assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to originals of all documents submitted to us as copies. As to questions of fact material to this opinion, we have, with your permission, relied without investigation upon the accuracy of the representations and warranties made by the Parent and the Merger Sub in the Merger Agreement and in the other Transaction Documents, corporate records, the certificates and other documents of officers and representatives of the Parent and the Merger Sub and upon statements made to us in discussions with the management of the Parent.
b) For the purposes of the opinions set forth in paragraph 1 below as to the valid existence and good standing of the Parent, we have, with your permission, relied solely upon a certificate of good standing of the Parent dated September 30, 2008 issued by the Secretary of State of the State of Delaware.
c) For the purposes of the opinions set forth in paragraph 2 below as to the valid existence and good standing of the Merger Sub, we have, with your permission, relied solely upon a certificate of good standing of the Merger Sub dated September 30, 2008 issued by the Secretary of State of the State of Delaware.
d) We have assumed, without verification, the requisite power (corporate or otherwise) of all parties (other than the Parent and the Merger Sub) and the due authorization, execution, and delivery of all of the relevant documents by the parties thereto (other than the Parent and the Merger Sub), and the legal capacity of all natural persons executing and delivering any such documents and that all of the relevant documents constitute legal, valid and binding obligations of each such party (other than the Parent and the Merger Sub), enforceable against such other party in accordance with their objective terms.
e) Our opinion is subject to and the enforceability of the Transaction Documents may be limited or affected by (a) the effect of applicable bankruptcy, insolvency, reorganization, moratorium, assignment for the benefit of creditors, liquidation, rearrangement, probate, conservatorship, fraudulent transfer, fraudulent conveyance and other similar laws (including court decisions) now or hereafter in effect and affecting the rights and remedies of creditors generally or providing for the relief of debtors, (b) the refusal of a particular court to grant (i) equitable remedies, including, without limiting the generality of the foregoing, specific performance, injunctive relief, waiver, laches, and estoppel, or (ii) a particular remedy sought under a Transaction Document as opposed to another remedy provided for therein or another remedy available at law or in equity, (c) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), including, without limitation, principles of good faith, fair dealing and reasonableness, and (d) judicial discretion.
f) For purposes of our opinion in paragraph 6, we have considered only those laws and regulations that in our experience are normally applicable to transactions of the type contemplated in the Transaction Documents, and our opinions do not extend to licenses, permits and approvals necessary for the conduct of business by the Parent or the Merger Sub. Without limiting the previous sentence, we express no opinion with respect to (i) the effect of any land use, safety, hazardous material, environmental or similar law, or any local or regional law, or any consents, approvals, authorizations or other actions by or any filing with any city, county, or other municipality or local governmental authority or (ii) the effect of or compliance with any state or federal laws or regulations applicable to the transactions contemplated by the Transaction Documents because of the nature of the business of any party thereto other than the Parent or the Merger Sub, or (iii) any antitrust, antifraud, patent, copyright, trademark or other intellectual property matter, or (iv) Section 721 (as amended by Section 5021 of the Omnibus Trade and Competitiveness Act of 1988, the so-called "Exon-Xxxxxx" provision) of the Defense Production Act of 1950 and the regulations thereunder.
g) In basing the opinions and other matters set forth herein on "our knowledge" or on facts "known to us," the words "our knowledge" or "known to us" shall mean the actual conscious awareness of facts or other information by members of the Primary Lawyer Group. The term "Primary Lawyer Group" shall mean (i) any lawyer in our firm who has had involvement in the specific transactions contemplated in the Transaction Documents or preparing this opinion or who regularly counsels the Parent with respect to corporate or transactional matters, and (ii) solely as to information relevant to a particular opinion issue or confirmation regarding a particular factual matter, any lawyer in our firm who has been primarily responsible for providing the response concerning that particular opinion issue or confirmation and without any special or additional investigation undertaken for the purposes of this opinion.
h) We have assumed that the terms and conditions of the transactions contemplated by the Transaction Documents have not been amended, modified or supplemented, directly or indirectly, by any other agreement or understanding of the parties or the waiver of any of the material provisions of the Transaction Documents.
i) Without limiting the generality of the preceding assumptions, qualifications and limitations, we express no opinion regarding the enforceability of the following:
i. waivers and releases of the benefit of procedural or substantive rights or defenses, including, without limitation the right to a jury trial;
ii. provisions requiring the Parent or the Merger Sub to indemnify any person or exculpating any such person from liability for its actions or inaction to the extent such indemnification or exculpation is contrary to public policy or law;
iii. provisions requiring that all waivers under, or modifications of, the Transaction Documents be in writing;
iv. provisions involving consent to or establishment of jurisdiction or venue, or relating to choice of law or choice of venue;
v. provisions for the concurrent or cumulative exercise of remedies which would have the effect of compensating you for an amount in excess of your actual loss; or
vi. provisions obligating a party to pay attorneys’ fees or other costs of collection in excess of what a court deems reasonable.
k) The enforceability of the Transaction Documents may be limited to the extent that remedies are sought for a breach that a court concludes is immaterial or does not adversely affect the Stockholders.
Based upon the foregoing, we are of the opinion that:
1. The Parent is a corporation validly existing and in good standing under the laws of the State of Delaware, with the requisite corporate power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations thereunder.
2. The Merger Sub is a corporation validly existing and in good standing under the laws of the State of Delaware, with the requisite corporate power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations thereunder.
3. Each of the Transaction Documents, as of the time of their respective execution and delivery, to which the Parent and the Merger Sub, respectively, are parties has been duly authorized, executed and delivered by the Parent and the Merger Sub, as applicable.
4. Each of the Transaction Documents to which the Parent or the Merger Sub is a party is a legal, valid and binding obligation of the Parent or the Merger Sub, as applicable, enforceable, against the Parent and the Merger Sub, as applicable, in accordance with its terms.
5. The authorized capital stock of the Parent consists of 25,000,000 shares of common stock, par value $0.01 per share ("Common Stock") and 5,000,000 shares of preferred stock, par value $0.01 per share. As of the date hereof, to our knowledge, the authorized and issued capital stock of Parent consisted of 9,527,206 shares of Common Stock, which does not include 139,299 treasury shares, and no shares of preferred stock. The shares of Common Stock to be issued in the Merger have been duly authorized by the Parent and, when issued in the Merger by the Parent, and delivered by the Parent in accordance with the terms of the Merger Agreement, will be validly issued, fully paid and nonassessable.
6. The execution, delivery and performance of the Transaction Documents by the Parent, and the consummation by the Parent of the transactions contemplated thereby, do not and will not: (i) result in a violation of the Certificate of Incorporation or By-Laws of the Parent; (ii) result in a violation of any current federal law or state law of the State of Delaware which in our experience is applicable both to general business corporations that are not engaged in regulated business activities and to transactions of the type contemplated by the Transaction Documents; or (iii) result in a violation of any court order or decree known to us. The execution, delivery and performance of the Transaction Documents by the Merger Sub, and the consummation by the Merger Sub of the transactions contemplated thereby, do not and will not: (i) result in a violation of the Certificate of Incorporation or By-Laws of the Merger Sub; (ii) result in a violation of any federal law or state law of the State of Delaware which in our experience is applicable both to general business corporations that are not engaged in regulated business activities and to transactions of the type contemplated by the Transaction Documents; or (iii) result in a violation of any court order or decree known to us.
7. To our knowledge, there are no pending lawsuits or other proceedings against the Parent or its properties before any court, arbitrator or governmental agency or authority that challenge the legality, validity or enforceability of the Transaction Documents.
The opinions set forth in this letter:
(1) are limited to those matters which are expressly set forth in this letter, and no opinion may be inferred or implied beyond the matters expressly set forth in this letter;
(2) must be read in conjunction with the assumptions, qualifications, limitations, exceptions and restrictions set forth in this letter; and
(3) are rendered as of the date of this letter, and we assume no obligation to update or supplement this opinion at any time or for any reason, including, without limitation, any changes in applicable law or changes of any facts or circumstances of which we become aware or which hereafter may be brought to our attention.
This opinion letter may be relied upon only by the Company, the Stockholders and Xxxxxx in connection with the execution and delivery of the Transaction Documents and the transactions contemplated thereby. The Company, the Stockholders and Xxxxxx may not rely upon this opinion letter for any other purpose, and no other person or entity may rely upon this opinion letter for any purpose without our prior written consent. This opinion letter may not be referred to, or described, furnished or quoted to, any other person, firm or entity, without in each instance our prior written consent.
Very truly yours,
EXHIBIT E
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of October ____, 2008 (this "Agreement"), by and among inTEST Corporation ("Parent"), the stockholders ("Stockholders") of Sigma Systems Corp. (the "Company"), Xxxxx X. Xxxxxx, as representative of the Stockholders (the "Stockholders’ Representative") (collectively, the foregoing are the "Transaction Parties"), and XX Xxxxxx Chase N.A. ("Escrow Agent").
Recitals
A. The Transaction Parties have entered into an Agreement and Plan of Merger (the "Underlying Agreement"), dated as of October ___, 2008, pursuant to which the Company is merging with and into, and thereby becoming, a wholly-owned subsidiary of Parent, and the Stockholders are receiving, in exchange for their shares of capital stock of the Company, certain consideration consisting, in part, in the form of shares of Parent’s common stock, par value $0.01 per share (the "Parent Stock") (such transaction, the "Transaction"). The Underlying Agreement provides that Parent shall deposit certain shares of Parent’s common stock, par value $0.01 per share, into a segregated escrow account to be held by Escrow Agent to be available to fund indemnity obligations of the Seller Indemnifying Persons (as defined in the Underlying Agreement) and, to the extent not so used, to be disbursed to the Stockholders.
B. Escrow Agent is willing to serve as agent on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and for
other good
and valuable consideration the receipt and sufficiency of which are the
hereby acknowledged, the parties hereto agree as follows:
1. Definitions: The following terms shall have the following meanings when used herein:
(a) "Claim Notice" shall mean a written notification which contains (i) a statement in reasonable detail that a Parent Indemnified Person has incurred Losses (as defined in the Underlying Agreement) or anticipates that it will incur Losses for which such Parent Indemnified Person is entitled to indemnification pursuant to the Underlying Agreement; (ii) the amount of such Losses, if known, or, if not known, an estimate of the foreseeable maximum amount of such Losses; (iii) if the Losses relate to a Third Party Claim (as defined in the Underlying Agreement), a description of the basis for such Third Party Claim; (iv) a statement that the Indemnitee is entitled to indemnification under the Underlying Agreement for such Losses, and (v) a demand for payment in a stated amount. In any case, a Claim Notice shall conform to the requirements of the Underlying Agreement.
(b) "Claim Response" shall mean a written response in which the Stockholders’ Representative shall do one of the following: (i) agree that the Parent Indemnified Person is entitled to receive all of the Claim Amount; (ii) agree that the Parent Indemnified Person is entitled to receive the amount agreed upon by the parties; or (iii) state that neither the preceding item (i) or item (ii) apply and state the amount of the Claim Amount, if any, that Stockholders’ Representative agrees that the Parent Indemnified Person is entitled to receive, in which case, solely for purposes of determining the amount to be distributed from the Account, Stockholders’ Representative shall be considered to dispute that the Parent Indemnified Person is entitled to receive the balance of the Claim Amount.
(c) "Closing Date" means the date of this Agreement.
(d) "Escrow Shares" shall mean the shares of common stock of Parent deposited by Parent with Escrow Agent as set forth on Schedule A hereto pursuant to Section 3 of this Agreement (such shares, the "Initial Escrow Shares"), together with any other stock dividends or other assets that may from time to time become included in the Escrow Shares.
(e) "Escrow Period" shall mean the period beginning on the date of this Agreement and ending on the eighteen-month anniversary of the Closing Date.
(f) "Estimated Claim Amount" shall mean the amount designated by the Parent Representative to be the amount of any Claim for which a Claim Notice has been delivered.
(g) "Joint Written Direction" shall mean a written direction executed by the Representatives and directing Escrow Agent to disburse all or a portion of the Escrow Shares or to take or refrain from taking an action pursuant to this Escrow Agreement. If the Joint Written Direction directs the Escrow Agent to disburse some, but less than all, of the Escrow Shares, then the Joint Written Direction shall specify the number or amount of Escrow Shares to be so disbursed.
(h) "Representatives" shall mean Parent and the Stockholders’ Representative.
2. Interpretation .. The descriptive headings of the several Sections and subsections of the Agreement are inserted for convenience only and shall not be a part of the Agreement for purposes of interpretation or otherwise. Section and subsection references contained herein are references to Sections and subsections of this Agreement unless otherwise specified. Terms such as "herein," "hereunder" and "hereof" refer to this Agreement as a whole and not to any specific section or subsection. With respect to all terms in this Agreement, the singular includes the plural and the plural the singular, and words importing any gender include the other genders. Parent and Stockholders’ Representative may be referred to herein as a "Party" or the "Parties." Capitalized terms not defined herein are as defined in the Underlying Agreement.
3. Appointment; The Account.
(a) The Transaction Parties hereby appoint Escrow Agent as their agent, to maintain the Account (as defined below), to receive, hold and disburse the Escrow Shares (as defined below) and to perform the other duties expressly set forth herein, and Escrow Agent hereby accepts such appointment on the terms and conditions set forth in this Agreement. Escrow Agent shall account for the Escrow Shares separately from its funds and the funds of other customers. Escrow Agent shall have the sole power of withdrawal from the Account.
(b) On or prior to the date of this Agreement, Escrow Agent has established on its books a segregated account entitled "Sigma Systems Corp. Escrow Account" (the "Account"). As of the date of this Agreement, Parent has delivered to Escrow Agent for credit to the Account the Initial Escrow Shares. The Account shall bear the taxpayer identification number of Parent, and any earnings, dividends or interest credited to the Account will be reported to Parent and added to the Escrow Shares. The Parties agree that all income earned from the investment of the Escrow Shares shall be treated and reported for all tax purposes as the Stockholders’ income.(c) During the term of this Agreement, any cash in the Account shall be invested, at the written instruction of Parent and as shall be acceptable to the Escrow Agent in (i) obligations issued or guaranteed by the United States of America or any agency or instrumentality thereof, (ii) obligations (including certificates of deposit and bankers’ acceptances) of domestic commercial banks which at the date of their last public reporting had total assets in excess of $500,000,000, (iii) commercial paper rated at least A-1 or P-1 or, if not rated, issued by companies having outstanding debt rated at least AA or Aa and (iv) money market mutual funds invested exclusively in some or all of the securities described in the foregoing clauses (i), (ii) and (iii). The Parent acknowledges receipt of a prospectus for money market fund. The Escrow Agent is hereby authorized to execute purchases and sales of investments through the facilities of its own trading or capital markets operations or those of any affiliated entity. The Escrow Agent or any of its affiliates may receive compensation with respect to any investment directed hereunder including without limitation charging an agency fee in connection with each transaction. The Parties recognize and agree that the Escrow Agent will not provide supervision, recommendations or advice relating to either the investment of moneys held in the Fund or the purchase, sale, retention or other disposition of any investment described herein. The Escrow Agent shall not have any liability for any loss sustained as a result of any investment in an investment made pursuant to the terms of this Escrow Agreement or as a result of any liquidation of any investment prior to its maturity or for the failure of the Parties to give the Escrow Agent instructions to invest or reinvest the Escrow Fund. The Escrow Agent shall have the right to liquidate any investments held in order to provide funds necessary to make required payments to Escrow Agent under this Escrow Agreement.
(d) The Escrow Agent has no tax reporting duties with this Agreement, unless dividends are paid with respect to the Escrow Shares. The Parties represent to the Escrow Agent that the transaction memorialized in the Underlying Agreement does not constitute an installment sale requiring any tax reporting or withholding of imputed interest or original issue discount to the IRS or other taxing authority.
(e) The Transaction Parties have provided the Escrow Agent with their respective fully executed Internal Revenue Service ("IRS") Form W-8, W-9 or other required documentation. The Transaction Parties each represent that its respective TIN assigned by the IRS is set forth on the delivered documentation.
4. Disbursement Procedures.
(a) Other than any disbursements made pursuant to Section 5 below, Escrow Agent shall disburse the Escrow Shares at any time and from time to time, upon receipt of, and in accordance with, either a Joint Written Direction or a certified copy of a judgment of a court of competent jurisdiction by which any Claim (or part thereof) has been adjudicated or awarded that is either: (A) final, and is accompanied by the opinion of counsel that the judgment or order is final and non-appealable, or (B) has been declared enforceable notwithstanding any appeal. Such Joint Written Direction shall contain instructions for the Escrow Shares to be delivered.
(b) On the fifth business day following the end of the Escrow Period, Escrow Agent shall: (i) subject to Section 4(c) below, retain the full Estimated Claim Amount of all claims for which Escrow Agent has, prior to the end of the Escrow Period, received a Claim Notice, if any, and which have not been resolved at such time; and (ii) distribute, as promptly as practicable, the balance of the Escrow Shares, in kind, along with any cash, cash equivalents or other assets in the Account to the Stockholders in the manner described on Schedule A, without any further instruction or direction from the Representatives.
(c) If upon the expiration of the Escrow Period, Escrow Agent has retained any Escrow Shares with respect to Estimated Claim Amounts pursuant to this Section 4, then the Escrow Agent may, in its sole discretion, either (i) retain all such remaining Escrow Shares, to be held in accordance with the provisions of this Escrow Agreement, until receipt by Escrow Agent of a Joint Written Direction with respect to the disposition of such Escrow Shares, or other final disposition of such funds pursuant to the terms and conditions hereof, or (ii) deliver all remaining Escrow Shares to a court of competent jurisdiction in the manner described in Section 6 below.
(d) To the extent that the Escrow Shares consist of certificated shares of Parent’s capital stock and there occurs any disbursement of some, but less than all, of the Escrow Shares, then such disbursement shall be effected as follows: Escrow Agent shall deliver to Parent’s transfer agent the share certificate(s) representing the Escrow Shares, and Parent’s transfer agent shall deliver to Escrow Agent replacement share certificates reflecting the appropriate record ownership of such shares that upon such disbursement are to be disbursed to the Stockholders or retained in the Account.
(e) Escrow Agent will furnish quarterly statements to Parent and Stockholders’ Representative setting forth the activity in the Account.
5. Indemnification Claims.
(a) The Parent Representative shall deliver each Claim Notice to the Stockholders’ Representative and Escrow Agent, such delivery to be in accordance with the notice provisions of this Escrow Agreement.
(b) Upon receipt of any Claim Notice prior to the end of the Escrow Period, Escrow Agent shall promptly make entries or notations in the account records relating to the Escrow Shares, indicating that Escrow Shares in an amount to satisfy the Estimated Claim Amount are reserved to satisfy such Claim, and identifying the date and number of such Claim Notice. Escrow Agent may ignore any Claim Notice received after the expiration of the Escrow Period.
(c) Within thirty (30) days of receipt by the Stockholders’ Representative of any Claim Notice, the Stockholders’ Representative shall deliver a Claim Response to the Indemnitee Representative and Escrow Agent, such delivery to be in accordance with the notice provisions of this Escrow Agreement.
(d) Upon the failure of Stockholders’ Representative to submit a timely Claim Response or the submission of a Claim Response which does not dispute the Claim or Claim Notice, the Escrow Agent shall disburse the amount or number of Escrow Shares equal to the Claim Amount to the applicable Parent Indemnified Person within five business days. Escrow Agent shall have no responsibility to determine whether any Claim Notice or Claim Response has been received by Parent or Stockholders’ Representative, as applicable, or to provide any Claim Notice or Claim Response to Indemnitor or Indemnitee.
(e) The parties acknowledge and agree that in accordance with the Underlying Agreement, to the extent that Losses are satisfied by the release of Escrow Shares, each share of common stock of Parent shall be valued at a price of Two Dollars Eighteen Cents ($2.18) per share, as adjusted for stock splits, stock dividends and similar events.
6. Suspension of Performance; Disbursement Into Court. If, at any time, (i) there shall exist any dispute between the Representatives with respect to the holding or disposition of any portion of the Escrow Shares or any other obligations of Escrow Agent hereunder, (ii) Escrow Agent is unable to determine, to Escrow Agent’s sole satisfaction, the proper disposition of any portion of the Escrow Shares or Escrow Agent’s proper actions with respect to its obligations hereunder, or (iii) the Representatives have not within thirty (30) days of the furnishing by Escrow Agent of a notice of resignation pursuant to Section 9 hereof, appointed a successor Escrow Agent to act hereunder, then Escrow Agent may, in its sole discretion, take either or both of the following actions:
(a) suspend the performance of any of its obligations under this Escrow Agreement until such dispute or uncertainty shall be resolved to the sole satisfaction of Escrow Agent or until a successor Escrow Agent shall have been appointed (as the case may be).
(b) petition (by means of an interpleader action or any other appropriate method) any court of competent jurisdiction in any venue convenient to Escrow Agent, for instructions with respect to such dispute or uncertainty, and to the extent required or permitted by law or such court, deliver into such court, for holding and disposition in accordance with the instructions of such court, all Escrow Shares, after payment to Escrow Agent of all fees and expenses (including court costs and attorneys’ fees) payable to, incurred by, or expected to be incurred by Escrow Agent in connection with the performance of its duties and the exercise of its rights hereunder.
Escrow Agent shall have no liability to the parties or any other person with respect to any suspension of performance or disbursement into court, specifically including any liability or claimed liability that may arise, or be alleged to have arisen, out of or as a result of any delay in the disbursement of the Escrow Shares or any delay in or with respect to any other action required or requested of Escrow Agent.
7. Voting of Escrow Shares .. The Stockholders’ Representative shall have the right, in its sole discretion, on behalf of the Stockholders, to direct the Escrow Agent in writing as to the exercise of any voting rights pertaining to the Escrow Shares, and the Escrow Agent shall comply with any such written instructions. In the absence of such written instructions, the Escrow Agent shall not vote any of the Escrow Shares. The Escrow Agent shall forward, as soon as reasonably practicable, the proxy statement, annual report and any other stockholder mailing materials that it receives from the Parent, or Exchange Agent, to the Stockholders’ Representative. The Stockholders’ Representative shall have no obligation to solicit consents or proxies from the Stockholders for purposes of any such vote.
8. Duties; Liabilities and Indemnification.
(a) Escrow Agent shall have only those duties and responsibilities as expressly set forth herein, and no other duty, obligation or covenant shall be implied or enforceable against Escrow Agent by any person.
(b) Without limiting the effect of Section 8(a) hereof, Escrow Agent shall have no obligation or liability to any party hereto (or any person claiming through any of them): (i) to review, examine, enforce, administer or take notice of any agreement, instrument or document other than this Agreement; (ii) to determine whether any conditions precedent to a disbursement of Escrow Shares, other than as set forth in Section 10, have been or will be satisfied or otherwise to investigate any notice received by Escrow Agent hereunder; (iii) to evaluate or determine the validity or legality of any action or omission by any other person; (iv) to make any payment to Stockholders or Parent from any source other than the Account; (v) to communicate with any person other than as expressly provided for in this Agreement; (vi) for any action or omission of Escrow Agent taken or made upon the oral or written, joint instructions of Stockholders and Parent; (vii) for any action or omission of any third party, including Stockholders, Parent or any federal or state bank regulator; (viii) for any other action or omission of, or for errors in judgment by, Escrow Agent under or in connection with this Agreement taken or made in good faith and without gross negligence or willful misconduct; and (ix) for incidental, consequential, indirect or punitive damages in any event.
(c) Escrow Agent may execute any of its powers and perform any of its duties hereunder by or through attorneys, agents, receivers or employees. Escrow Agent is entitled to advice of counsel concerning all matters hereunder, and may act on the opinion or advice of counsel or accountants. Escrow Agent is not responsible for any loss or damage resulting from any action or non-action taken or made in good faith in reliance on any such opinion or advice.
(d) Escrow Agent shall be entitled to rely upon any order, judgment, certification, demand, notice, instrument or other writing delivered to it hereunder without being required to determine the authenticity or the correctness of any fact stated therein or the propriety or validity of the service thereof. Escrow Agent may act in reliance upon any instrument or signature believed by it to be genuine and may assume that the person purporting to give receipt or advice or make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so.
(e) Stockholders and Parent will, jointly and severally, indemnify and hold Escrow Agent and each of its officers, directors, employees and affiliates ("Indemnified Parties") harmless from and against any and all claims, suits, liabilities, costs, damages and expenses (including reasonable attorneys’ fees and expenses) suffered or incurred by an Indemnified Party and arising out of or relating to this Agreement, except any such claims, suits, liabilities, cost, damages or expenses suffered or incurred by any Indemnified Parties as direct result of the Indemnified Party’s: (i) own gross negligence or willful misconduct in the discharge of its obligations under this Agreement, or (ii) following written instructions or directions, whether joint or singular, from Stockholders’ Representative or Parent unless Escrow Agent would be violating this Agreement by following such written instructions or directions.
9. Term; Termination.
(a) This Agreement shall terminate on the first to occur of: (i) the date as of which all Escrow Shares in the Account have been disbursed in accordance with this Agreement, or (ii) the date that is five business days after the date on which Parent and Stockholders’ Representative give joint written notice to Escrow Agent that this Agreement shall terminate. Any shares or funds remaining in the Account upon termination or expiration of this Agreement shall be remitted to the Stockholders’ Representative.
(b) Escrow Agent may resign as escrow agent hereunder upon thirty (30) days’ prior written notice to Parent and Stockholders’ Representative. On or prior to the effective date of any such resignation, and provided that all fees and expenses due and payable hereunder have been paid, Escrow Agent shall transfer the Escrow Shares to a party mutually agreed upon by the parties to hold in trust for the benefit of the Stockholders and Parent and Escrow Agent shall automatically cease to be the escrow agent under this Agreement.
(c) The provisions of Sections 4 and 8 shall survive any termination of this Agreement or the resignation, replacement or removal of the Escrow Agent.
10. Fees and Expenses of Escrow Agent.
(a) Except as expressly provided herein, each party shall bear its own expenses in connection with this Agreement and the transactions contemplated hereby. Parent shall be responsible for, and shall pay to Escrow Agent on demand, its fees in connection with the services rendered by Escrow Agent hereunder, which shall be as set forth on Schedule A. In addition, Parent will reimburse Escrow Agent for all reasonable other out-of-pocket expenses (including without limitation, overnight delivery charges, and reasonable attorneys’ fees (which may include the allocated cost of internal counsel to Escrow Agent)) paid or incurred by it in the performance of its duties under this Agreement. If the fees and expenses due to Escrow Agent hereunder are not paid on demand, then Parent and Stockholders irrevocably authorize Escrow Agent to deduct its fees and expenses from the Escrow Shares without any further notice or demand to any person.
(b) In the event that federal, state or local laws and regulations impose new or additional duties on Escrow Agent in the conduct of its business as an escrow agent, including under this Agreement, then Escrow Agent may increase its fees and expense reimbursement rates under this Agreement upon at least thirty (30) days’ prior written notice to the Parties.
11. Appointment of Representative . By executing and delivering this Agreement, each Stockholder, for itself and its heirs, executors, legal representatives, successors and assigns, irrevocably constitutes and appoints the Stockholders’ Representative as its true and lawful agent and attorney-in-fact with full power of substitution to act in its name, place and stead with respect to all matters contemplated by the terms and provisions of this Escrow Agreement, including the giving and receipt of any notices required hereunder, and to act on behalf of such Stockholder in any dispute, litigation or arbitration involving matters related to the subject matter of this Agreement, and to take all actions on behalf of such Stockholder in connection therewith. The appointment of the Stockholders’ Representative shall be deemed coupled with an interest and shall be irrevocable, and Parent, Escrow Agent and any other person or entity may conclusively and absolutely rely, without inquiry, upon any action of the Stockholders’ Representative on behalf of each and every Stockholder in all matters in which it has been granted authority, and all such actions shall be conclusive and binding upon each Stockholder. The Stockholders’ Representative may resign from its capacity as such at any time by written notice delivered to Parent and the Escrow Agent and shall be deemed to have resigned upon death. If there is a vacancy at any time in the position of Stockholders’ Representative, such vacancy shall be filled by the written authorization of the Stockholders (provided that so long as the Stockholders are trusts, only a trustee of such a trust may be the Stockholders’ Representative).
12. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand, by facsimile (receipt acknowledged), recognized overnight courier (receipt acknowledged) or by certified mail return receipt confirmed, addressed as follows: If to the Parent:
inTEST Corporation
0 Xxxxxxxxxx Xxxx
Xxxxxx Xxxx XX 00000
Fax No.: (000) 000-0000
Attention: Xxxx X. Xxxxx Xx.
With a copy to:
Xxxx Xxxxx LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Fax No.: 000-000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to a Stockholder or the Stockholders’ Representative:
0000 Xxxxxxxx Xxxxx
Xx Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
with a copy to:
Xxxxxx & Xxxxxxx, P.C.
000 X. X Xxxxxx # 0000
Xxx Xxxxx, XX 00000
Fax No.: (000) 000-0000
Attention: Xxxx Xxxxx, Esq.
If to Escrow Agent:
XX Xxxxxx Chase N.A.
World Wide Securities Services
0 Xxx Xxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax No: 000-000-0000
Attn: Xxxxx Xxxxxxxxx
or to such other address as to any party hereto as such party shall designate by like notice to the other parties hereto.
13. Other Agreements . This Agreement and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to choice of law principles. This Agreement (including the above recitals which are a substantive part hereof) and the schedules and exhibits hereto constitute the complete and exclusive expression of the terms of the agreement between the parties, and supersede all prior or contemporaneous oral or written agreements, arrangements and understandings among the parties with respect to the subject matter of this Agreement. No amendment to this Agreement shall be effective unless it is in writing and signed by duly authorized representatives of each of the parties hereto. A purported waiver of any right or condition set forth herein shall not be valid for any purpose unless in writing and signed by the party against whom such waiver is asserted. This Agreement is for the sole and exclusive benefit of, and shall be binding upon, the parties hereto and their successors and permitted assigns, and there are no third party Parent beneficiaries of this Agreement.14. WAIVER OF JURY TRIAL . EACH OF THE PARTIES HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN RESOLVING ANY CLAIM OR COUNTERCLAIM RELATING TO OR ARISING OUT OF THIS AGREEMENT.
15. Force Majeure . No party to this Escrow Agreement is liable to any other party for losses due to, or if it is unable to perform its obligations under the terms of this Escrow Agreement because of, acts of God, fire, war terrorism, floods, strikes, electrical outages, equipment or transmission failure, or other causes beyond its reasonable control.
IN WITNESS WHEREOF, the parties, by their duly authorized officers, have executed this Escrow Agreement as of the date set forth above.
PARENT:
inTEST CORPORATION
By: ____________________________
Name: Xxxx X. Xxxxx, Xx.
Title: Chief Financial Officer
STOCKHOLDERS:
The Exemption Trust, a sub-trust of the
Xxxxxx X. Xxxxxxx Separate
Property
Trust dated March 17, 2003
By: ____________________________
Name Xxxxx X. Xxxxxx
Title: Trustee
The Xxxxx X. Xxxxxx Trust, a sub-trust
of the Xxxxxx X. Xxxxxxx
Separate Property
Trust dated March 17, 2003
By: _____________________________
Name Xxxxx X. Xxxxxx
Title: Trustee
STOCKHOLDERS’ REPRESENTATIVE
_________________________________
Xxxxx X. Xxxxxx
ESCROW AGENT:
XX Xxxxxx Chase N.A.
By: _____________________________
Name:
Title:
SCHEDULE A
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1. |
Escrow Shares. |
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Number of Initial Escrow Shares: |
180,000 |
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Delivery instructions: |
To the following entities in the following proportions: The Exemption Trust, a sub-trust
of the Xxxxxx X. Xxxxxxx Separate Property Trust dated March 17, 2003
[24.22668%] |
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2. |
Escrow Agent Fees. |
$2500 per annum. |
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EXHIBIT F
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made as of this ____ day of ____, 2008, by and between SigmaSYS Corp., a Delaware corporation ("SigmaSYS"), Xxxxx X. Xxxxxx, Trustee of the Exemption Trust, a sub-trust of the Xxxxxx X. Xxxxxxx Separate Property Trust dated March 17, 2003 (the "Exemption Trust"), Xxxxx X. Xxxxxx, Trustee of the Xxxxx X. Xxxxxx Trust, a sub-trust of the Xxxxxx X. Xxxxxxx Separate Property Trust dated March 17, 2003 (the "Q-Tip Trust" and, together with the Exemption Trust, each a "Secured Party"), and Xxxxx X. Xxxxxx (the "Secured Party Representative").
For good and valuable consideration, the receipt of which is hereby acknowledged, and intending to be legally bound, the parties agree as follows:
1. SigmaSYS grants to the Secured Parties a security interest in its Accounts, Chattel Paper, Deposit Accounts, Documents, Equipment, Fixtures, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter of Credit Rights, Payment Intangibles and Supporting Obligations and all Proceeds, all now owned and hereafter acquired and all proceeds thereof, as well as all now existing and hereafter acquired books, records, writings, information and other property relating to, embodying, incorporating or referring to, any of the foregoing (the "Collateral"). Capitalized terms used but not defined in this Agreement have the respective meanings given them in the Delaware Uniform Commercial Code as the same may be amended from time to time.
2. The security interest is granted to secure the payment by inTEST Corporation, a Delaware corporation ("Parent") of (i) Parent’s promissory note to the Exemption Trust of even date with this Agreement and (ii) Parent’s promissory note to the Q-Tip Trust of even date with this Agreement (collectively, the "Notes"), which Notes have an aggregate original principal amount of $_____________ (the "Obligations"). Upon the repayment of all of the Obligations, the security interest created hereby shall terminate and all rights in and to the Collateral shall revert to SigmaSYS and the Secured Parties will, at the expense of SigmaSYS to the extent permitted by law, execute and deliver to SigmaSYS such documents as SigmaSYS reasonably requests to evidence the termination of such security interest and the release of such Collateral.
3. SigmaSYS hereby covenants, represents and warrants as follows:
(a) SigmaSYS is the sole owner of and has good and marketable title to the Collateral (or, in the case of after-acquired Collateral, at the time SigmaSYS acquires rights in the Collateral) and, except as otherwise disclosed in writing to Secured Party Representative, no person has (or, in the case of after-acquired Collateral, at the time SigmaSYS acquires rights therein, will have) any right, title, claim or interest (by way of security interest, mortgage, pledge, lien, charge or other encumbrances in), against or to the Collateral, except for:
(i) any statutory lien for taxes not yet due, any statutory lien of a landlord, carrier, warehouseman, mechanic or materialman incurred for sums not yet due, purchase money claims and claims securing retail payments under capital lease agreements, and liens that are immaterial in character, amount and extend and which do not materially detract from the value or interfere with the present use of the properties they affect (the foregoing, collectively, "Permitted Encumbrances"); and
(ii) liens junior in priority to the Secured Parties’ security interest in the Collateral ("Junior Liens").
(b) The aggregate book value of the Collateral that is not subject to Junior Liens shall, as of the last day of each calendar quarter while either of the Notes remains outstanding, be not less than One Hundred Ten Percent (110%) of the aggregate outstanding principal amount of the Notes.
(c) SigmaSYS hereby agrees to allow, at all reasonable times, and from time to time, without the necessity of any prior notice or demand, each Secured Party by or through any of its officers, agents, attorneys, accountants, or other representative, to examine or inspect the Collateral wherever the same may be located and to examine, inspect, and make copies of SigmaSYS’s books and records respecting any or all of the Collateral.
(d) SigmaSYS shall pay all taxes and assessments upon the Collateral promptly when due unless reasonably contested in good faith.
(e) To the knowledge of SigmaSYS after diligent inquiry, all information heretofore, herein or hereafter supplied to the Secured Party Representative or to either Secured Party by or on behalf of SigmaSYS with respect to the Collateral is accurate and complete in all material respects.
(f) The execution, delivery and performance of this Agreement are within the corporate power of SigmaSYS, have been duly authorized, are not in contravention of law or any of the terms of SigmaSYS’s articles of incorporation or bylaws, or of any other indenture, agreement or undertaking to which SigmaSYS is a party or by which it is bound.
(g) SigmaSYS shall do, make, execute and deliver all such additional further acts, things, deeds, assurances, and instruments as Secured Party Representative may reasonably require, to assure to the Secured Parties their rights hereunder in or to the Collateral.
4. The following shall constitute events of default (each an "Event of Default") hereunder:
(a) The occurrence of a default under either Note if the same is not cured within thirty (30) days after written notice to SigmaSYS.
(b) The failure of SigmaSYS to perform any covenant under this Agreement if such failure is not cured within thirty (30) days after written notice to SigmaSYS.
(c) SigmaSYS becomes insolvent, a receiver is appointed for any part of SigmaSYS’s property, SigmaSYS makes an assignment for the benefit of creditors, or any proceeding is commenced either by SigmaSYS or against SigmaSYS under any bankruptcy or insolvency laws.
5. Upon the occurrence of any Event of Default, and at any time thereafter, each Secured Party shall have all of the rights and remedies of a secured party under the Delaware Uniform Commercial Code, including the right to sell the Collateral at public sale without the necessity of first obtaining a judicial decree authorizing sale. Such remedies shall be in addition to any other remedies provided by law or in any other document executed by SigmaSYS.
6. So long as no Event of Default shall have occurred and be continuing or would result from any of the following actions, SigmaSYS may in the ordinary course of its business dispose of any Collateral which constitutes tangible personal property and enforce and collect Collateral which constitutes Accounts or General Intangibles, and SigmaSYS may retain, use and apply for its corporate purposes the Collateral and proceeds thereof.
7. SigmaSYS hereby agrees that, so long as an uncured Event of Default continues, at any time, without presentment, or demand, and without affecting or impairing in any way the rights of Secured Party with respect to the Collateral, the obligations of SigmaSYS hereunder or the Notes, Secured Party may – but shall not be obligated to and shall incur no liability to SigmaSYS or any third party for failure to – take any action that SigmaSYS is obligated by this Agreement to do and to exercise such rights and powers as SigmaSYS might exercise with respect to the Collateral, and SigmaSYS hereby irrevocably appoints Secured Party as its attorney-in-fact to exercise such rights and powers. SigmaSYS agrees to reimburse Secured Party upon demand for any costs and expenses, including, without limitation, reasonable attorneys’ fees, Secured Party may incur while acting as SigmaSYS’s attorney-in-fact hereunder, all of which costs and expenses are included in the obligations secured hereby. SigmaSYS further agrees that Secured Party will not be responsible for any act of commission or omission, excluding willful misconduct or gross negligence, arising out of the exercise of the rights and powers of SigmaSYS by Secured Party as attorney-in-fact. SigmaSYS shall pay all costs of recording any financing statements executed in connection with this Agreement.
8. Each Secured Party hereby appoints the Secured Party Representative as its agent for purposes of holding and enforcing rights and remedies under this Agreement or against any Collateral, and authorizes the Secured Party Representative to take such action on its behalf and to exercise such powers and discretion as this Agreement permits, in each case with respect to each Secured Party’s respective interest in the Collateral, and Secured Party Representative hereby accepts such appointment. Each Secured Party and the Secured Party Representative acknowledges and agrees that SigmaSYS may rely on any notice from, or act of, the Secured Party Representative hereunder as the act of the Secured Parties.
9. Any demand or notice that either party may give to the other shall be mailed by certified mail, return receipt requested, addressed to the Secured Parties at 0000 Xxxxxxxx Xxxxx, Xx Xxxxx, XX 00000, Attn: Xxxxx X. Xxxxxx (it being acknowledged that any such demand or notice delivered to that address shall constitute delivery to both Secured Parties), and addressed to SigmaSYS at c/o inTEST Corporation, 0 Xxxxxxxxxx Xxxx, Xxxxxx Xxxx XX 00000, attn: Xxxx X. Xxxxx, Xx. Either party may change its address for notices by a notice duly given to the other. The parties shall execute and deliver all further instruments and documents and shall take any other action as may be reasonably required to more effectively carry out the terms and provisions of this Agreement. This Agreement constitutes the entire agreement between the parties concerning this subject matter and may be amended, waived, or discharged only by an agreement in writing signed by all of the parties. If any provision of this Agreement is determined by a court to be invalid, illegal or unenforceable, this Agreement shall be construed as if that provision had been amended to the extent necessary to cause this Agreement to be enforceable and to preserve the transactions contemplated by this Agreement to the greatest extent possible. This Agreement shall be binding upon and inure to the benefit of the parties and their respective personal representatives and successors. The laws of the State of Delaware shall govern the validity and construction of this Agreement, without regard to the principles of conflict of laws, and the parties submit to the jurisdiction of the courts of the State of Delaware and the venue of the U.S. District Court for the District of Delaware. Each party has participated to a significant degree in the drafting and preparation of this Agreement, and no provision shall be construed against a party on the basis of that party’s being the "drafter."
10. This Agreement may be executed by facsimile and in one or more counterparts, each of which shall be deemed an original but all of which counterparts collectively shall constitute one instrument. The transmission of a signed counterpart of this Agreement by facsimile or by portable document file ("PDF") shall have the same force and effect as delivery of an original signed counterpart of this Agreement, and shall constitute valid and effective delivery for all purposes.
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IN WITNESS WHEREOF, the parties have executed this Security Agreement as of the day and year first above written.
SigmaSYS Corp.
By: __________________________(SEAL)
Name:
Title:
SECURED PARTIES:
The Exemption Trust, a sub-trust of the
Xxxxxx X. Xxxxxxx Separate Property
Trust dated March 17, 2003
By: _________________________
Name: Xxxxx X. Xxxxxx
Title: Trustee
The Xxxxx X. Xxxxxx Trust, a sub-trust
of the Xxxxxx X. Xxxxxxx Separate Property
Trust dated March 17, 2003
By: _________________________
Name: Xxxxx X. Xxxxxx
Title: Trustee
SECURED PARTY REPRESENTATIVE:
_______________________
Xxxxx X. Xxxxxx
